Forecast: Steady, Moderate Growth
Vacancy rates generally are tightening in commercial real estate sectors, with modest rent growth, according to the National Association of Realtors’ (NAR) quarterly commercial real estate forecast. Among the forecast’s findings is the discovery that rising international trade is boosting demand for warehouse space. National vacancy rates over the coming year are forecast to decline 0.2 percent in the office market, 0.6 percent in industrial, and 0.6 percent for retail, according to the report, which offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail, and multifamily markets.
The report says that office vacancies haven’t declined much, blaming the fact that total jobs today are still below that of the pre-recession level in 2007. The markets with the lowest office vacancy rates in the third quarter are Washington, D.C., with a vacancy rate of 9.7 percent; New York City, at 9.8 percent; Little Rock, Ark., at 12.1 percent; and Birmingham, Ala., at 12.4 percent. Office rents should increase 2.5 percent this year and 2.8 percent in 2014, according to the report.
There’s some good news for shopping center and mall owners: Consumer spending has been favorable for the retail market this year. And it should continue—retail vacancy rates are forecast to decline from 10.6 percent in the third quarter of this year to 10.0 percent in the third quarter of 2014. Presently, markets with the lowest retail vacancy rates include San Francisco, 3.9 percent; Fairfield County, Conn., at 4.1 percent; Long Island, N.Y., 5.0 percent; and Orange County, Calif., at 5.5 percent.
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