Commercial real estate outlook good despite sluggish economy

by Ryan Smith28 May 2014
Despite disappointing economic growth in the first quarter, the outlook for commercial real estate is still good, according to new data released by the National Association of Realtors.

NAR Chief Economist Lawrence Yun said that the slowdown in the first quarter wasn’t indicative of the economy’s overall health.

“Gross Domestic Product should expand closer to 3 percent for the remainder of the year,” Yun said. “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.”

In the commercial real estate sector, national vacancy rates for office space are expected to fall 0.2% over the next 12 months, while the need for industrial space will get a boost from international trade gains.

“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,” Yun said. “Many renters who are getting squeezed may begin to view homeownership as a more favorable, long-term option.”