Improvement continues in all major commercial property sectors
Posted on May 28, 2014
Source: Darren Currin, Journalrecord.com
Despite the fact that economic growth
was disappointing during the first quarter of 2014, the
National Association of Realtors quarterly commercial real estate forecast said all of the major commercial property sectors are
slightly improving.
Lawrence Yun, NAR chief economist,
said the sluggish growth experienced in the first quarter is not indicative of
the actual health of the economy. “Gross domestic product should expand closer
to 3 percent for the remainder of the year. The improved lending for commercial
loans and continuing job gains we’ve seen this spring bode well for modest
progress in commercial real estate leases and purchases of properties.”
However, Yun cautions that with rising
long-term interest rates on the horizon, consistent economic growth is
imperative to solid commercial real estate investment in the years ahead.
National vacancy rates in the office
market are forecast to decline 0.2 percentage points over the coming year,
while international trade gains continue to boost use for industrial space,
which forecasts a decline of 0.3 points. The outlook for personal income and
consumer spending is favorable for the retail market, likely leading to a vacancy
decline of 0.2 percent.
“The multifamily sector continues to
be the top performer in commercial real estate with the lowest vacancy rates.
However, tight availability – despite new construction – is causing rents to
currently rise near 4 percent annually in many markets,” said Yun. “Many
renters who are getting squeezed may begin to view homeownership as a more
favorable, long-term option.”
NAR’s latest Commercial Real Estate
Outlook offers overall projections for four major commercial sectors and analyzes
quarterly data in the office, industrial, retail and multifamily markets.
Historic data for metro areas were provided by Reis Inc.
Office Markets
Office vacancy rates should decline
from an expected 15.8 percent in the second quarter of this year to 15.6
percent in the second quarter of 2015.
Currently, the markets with the lowest
office vacancy rates in the second quarter are New York City and Washington,
D.C., at 9.4 percent; Little Rock, Ark., 11.5 percent; San Francisco, 12.6
percent; and New Orleans, at 12.8 percent.
Office rents are projected to increase
2.5 percent in 2014 and 3.2 percent next year. Net absorption of office space
in the U.S., which includes the leasing of new space coming on the market as
well as space in existing properties, is likely to total 39.7 million square
feet this year and 49.8 million in 2015.
Industrial Markets
Industrial vacancy rates are
anticipated to fall from 9.0 percent in the second quarter to 8.7 percent in the
second quarter of 2015.
The areas with the lowest industrial
vacancy rates currently are Orange County, Calif., with a vacancy rate of 3.5
percent; Los Angeles, 3.9 percent; Miami and Seattle, 6.0 percent, and Palm
Beach, Fla., at 6.5 percent.
Annual industrial rents should rise
2.4 percent this year and 2.6 percent in 2015. Net absorption of industrial
space nationally is seen at 107.8 million square feet in 2014 and 107.1 million
next year.
Retail Markets
Vacancy rates in the retail market are
expected to decline from 10.0 percent currently to 9.8 percent in the second
quarter of 2015.
Presently, markets with the lowest
retail vacancy rates include San Francisco, at 3.2 percent; Fairfield County,
Conn., 3.8 percent; and San Jose, Calif., at 4.7 percent. Northern New Jersey;
Long Island, N.Y.; and Orange County, Calif., all have a vacancy rate of 5.3
percent.
Average retail rents are forecast to
rise 2.0 percent in 2014 and 2.3 percent next year. Net absorption of retail
space is likely to total 11.5 million square feet this year and 19.6 million in
2015.
Apartment Markets
The apartment rental market should see
vacancy rates edge up from 4.0 percent in the second quarter to 4.1 percent in
the second quarter of 2015, with added supply helping to meet growing demand.
Vacancy rates below 5 percent are generally considered a landlord’s market,
with demand justifying higher rent.
Areas with the lowest multifamily
vacancy rates currently are New Haven, Conn., at 2.3 percent; Ventura County,
Calif., 2.4 percent; and New York City; San Diego; Hartford, Conn.;
Oakland-East Bay, Calif., and San Diego, at 2.5 percent each.
Average apartment rents are projected
to rise 4.0 percent this year and in 2015. Apartment net absorption is expected
to total 221,400 units in 2014 and 173,100 next year.
Source: Darren Currin, Journalrecord.com
DISCLAIMER: This blog has been curated from an
alternate source and is designed for informational purposes to highlight the
commercial real estate market. It solely represents the opinion of the specific
blogger and does not necessarily represent the opinion of Pacific Coast
Commercial. www.PacificCoastCommercial.com
Keywords: San
Diego Commercial Real Estate For Sale, Commercial Property In San Diego,
Commercial Real Estate In San Diego, San Diego Investment Real Estate,
Commercial Property Management In San Diego, San Diego Commercial Property
Management, Commercial Property Management San Diego, Managed Commercial
Property San Diego, Commercial Property For Sale San Diego, San Diego
Commercial Real Estate Leasing
Comments
Post a Comment