It is no surprise that the residential and commercial real estate markets are intimately connected. What befalls the residential market typically cycles through the commercial markets, but with up to an 18-month lag. Still, a recent National Association of Realtors report on the commercial real estate market states that strong demand, limited supply and solid fundamentals make this sector a “bright spot in the economy.”
Harvey E. Green, president and ceo of Marcus & Millichap, a commercial real estate brokerage company in Encino, Ca. concurs. Green argues that the lag in this real estate cycle between the residential and commercial market will be much longer than 18 months.
Why? “Much of the vacant space from the Tech Wreck has been absorbed and yet there have been natural brakes in supply as construction costs climb,” he says. One result, he says, is that this year has seen the strongest rental growth in the office, retail and industrial markets since 2000. “Unless something spooks the underlying markets, rents should continue to grow,” he says. Lets hope he is right.