Commercial Markets Follow Broader Economic Trends in Q3 of 2012

by 27 Aug 2012

(NAR) -- With a slowing national economy, demand for commercial space remains positive, but the growth outlook has been moderated. Sluggish employment is slowing demand for office space. Retail spaces are still working through supply issues and weak consumer demand. Industrial warehouse spaces are benefiting from increasing trade, while apartments remain a strong performer.

For office properties, net absorption is expected to total 24.1 million square feet this year, leading to a projected 16.1 percent vacancy rate for the year. The slight decline in vacancy is likely to be accompanied by a 2.0 percent rise in rents. Absorption in the industrial sector is expected to reach 59.9 million square feet this year, resulting in a 10.8 percent vacancy rate and a 1.7 percent rent rise. The retail sector is expected to exceed 10.3 million square feet this year. Retail availability will likely decline to 11.0 percent for the year, and rent will rise 0.8 percent.

The apartment rental market continues to be the standout in the commercial sector. Net absorption is expected to reach 219,318 units this year, driving the vacancy rate to 4.3 percent (from 5.2% in 2011). Rent is projected to rise 4.1 percent this year and an additional 4.4 percent in 2013.

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