Commercial Real Estate Vacancies Slowly Declining, Rents Rising

Commercial Real Estate Vacancies Slowly Declining, Rents Rising 
WASHINGTON, DC -- (Marketwire) -- 11/26/12 --  Most of the major
commercial real estate sectors show gradually improving fundamentals
and are easily absorbing the relatively small amount of new space
that is coming online, with a full recovery already in the
multifamily market, according to the National Association of
Realtors(R) quarterly commercial real estate forecast.  
Lawrence Yun, NAR chief economist, said the market has been slowly
building momentum. "Job creation is the key to increasing demand in
the commercial real estate sectors," he said. "The economy is
expected to grow 2.5 percent next year, and with modest job creation,
assuming there is no fiscal cliff, the demand for commercial space
will gradually rise. The greatest friction that remains is a tight
credit environment, notably for smaller properties." 
Vacancy rates over the next four quarters are forecast to decline 1.0
percentage point in the office market, 0.6 point in industrial, 0.2
point for retail and 0.1 point in multifamily; however, multifamily
has the tightest availability and is experiencing the strongest rent
increases, well above the rate of inflation. 
"The primary factor holding back greater job creation has been
uncertainty over regulations and associated costs," Yun said. "With
the elections behind us and Washington apparently resolved to prevent
a fiscal cliff, it's hoped that ambiguity over regulatory issues will
clear relatively soon so employers can understand the rules of the
game and the layout of the field." 
NAR's latest Commercial Real Estate Outlook(1)  offers 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.,(2) a source of commercial
real estate performance information. 
Office Markets
 Vacancy rates in the office sector are projected to
fall from an estimated 16.7 percent in the fourth quarter to 15.7
percent in the fourth quarter of 2013.  
The markets with the lowest office vacancy rates presently (in the
fourth quarter) are Washington, D.C., with a vacancy rate of 9.6
percent; New York City, at 10.1 percent; and New Orleans, 12.9
Office rent is expected to increase 2.0 percent this year and 2.5
percent in 2013. 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 21.7 million square
feet in 2012 and 49.0 million next year. 
Industrial Markets 
 Industrial vacancy rates should decline from
10.1 percent in the fourth quarter of this year to 9.5 percent in the
fourth quarter of 2013. 
The areas with the lowest industrial vacancy rates currently are
Orange County, Calif., with a vacancy rate of 4.3 percent; Los
Angeles, 4.4 percent; and Miami at 6.5 percent. 
Annual industrial rent is forecast to rise 1.7 percent in 2012 and
2.2 percent next year. Net absorption of industrial space nationally
will probably total 93.4 million square feet this year and 89.6
million in 2013. 
Retail Markets
 Retail vacancy rates are expected to ease from 10.8
percent in the fourth quarter to 10.6 percent in the fourth quarter
of 2013. 
Presently, markets with the lowest retail vacancy rates include San
Francisco and Fairfield County, Conn., both at 3.9 percent; Long
Island, N.Y., 5.1 percent; and Orange County, Calif., 5.4 percent. 
Average retail rent should increase 0.8 percent this year and 1.4
percent in 2013. Net absorption of retail space is estimated to be
9.1 million square feet this year and 19.8 million in 2013. 
Multifamily Markets
 The apartment rental market -- multifamily
housing -- is projected to see vacancy rates decline from 4.0 percent
in the fourth quarter to 3.9 percent in the fourth quarter of 2013;
vacancy rates below 5 percent are considered a landlord's market with
demand justifying higher rents. 
Areas with the lowest multifamily vacancy rates currently are
Portland, Ore., at 2.1 percent; New York City, 2.2 percent; and
Minneapolis, 2.3 percent. 
Average apartment rent should increase 4.1 percent in 2012 and
another 4.6 percent next year. Multifamily net absorption is likely
to be 219,700 units this year and 234,600 in 2013. 
The Commercial Real Estate Outlook is published by the NAR Research
Division for the commercial community. NAR's Commercial Division,
formed in 1990, provides targeted products and services to meet the
needs of the commercial market and constituency within NAR. 
The NAR commercial components include commercial members; commercial
committees, subcommittees and forums; commercial real estate boards
and structures; and the NAR commercial affiliate organizations --
CCIM Institute, Institute of Real Estate Management, Realtors(R) Land
Institute, Society of Industrial and Office Realtors(R), and
Counselors of Real Estate. 
Approximately 78,000 NAR and institute affiliate members specialize
in commercial brokerage and related services, and an additional
232,000 members offer commercial real estate services as a secondary
The National Association of Realtors(R), "The Voice for Real Estate,"
is America's largest trade association, representing 1 million
members involved in all aspects of the residential and commercial
real estate industries. 
(1)Additional analyses will be posted under Economists' Outlook in
the Research blog section of in coming days at: 
(2)Beginning in the third quarter of 2011, NAR commercial forecasts
have been generated based on historical data provided by REIS, Inc.,
and do not correspond with prior historical information from previous
forecasts. This source permits coverage of more metro areas than were
previously covered. 
The next commercial real estate forecast and quarterly market report
will be released on February 25 at 10:00 a.m. EST. 
Information about NAR is available at News releases
are posted in the website's "News and Commentary" tab. Statistical
data in this release, as well as other tables and surveys, are posted
in the "Research and Statistics" tab of 
For Further Information Contact:
Walter Molony
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