NAR Optimistic about Commercial Market, "A Landlord’s Market"

Multi-family rentals are leading the
recovery in the commercial real estate market, becoming what the National
Association of Realtors® (NAR) calls “a landlord’s market commanding bigger
rent increases.”  NAR, in its quarterly
commercial real estate forecast said that all of the major commercial real
estate sectors are seeing improved fundamentals, but seems most bullish about the
multi-family sector.

NAR is projecting that vacancies in the
apartment rental market is likely to drop from 4.7 percent in the first quarter
of 2012 to 4.5 percent in the first quarter of 2013.  Multifamily vacancy rates below 5 percent are
generally considered to indicate a landord’s market with demand justifying
higher rents.

Rents did increase an average of 2.2
percent last year and are expected to rise 3.8 percent this year and another 4
percent in 2013.  The absorption rate for
apartments is expected to net out at 209,900 units in 2012 and 223,600 in 2013.

The areas with the lowest multi-family
vacancy rates are New York City, 1.8 percent; Minneapolis and Portland, Oregon
at 2.5 percent each, and San Jose, California at 2.7 percent.

NAR Chief Economist Lawrence Yun said, “Household formation appears to be rising from pent-up
demand.  The tight apartment market
should encourage more apartment construction.  Otherwise, rent increases
could further accelerate in the near-to-intermediate term.”

Forecasts for the other commercial
sectors are also positive.  Vacancies in
the office sector are expected to decline 0.4 percent point from the current
rate of 16 percent over the next year and rent may go up 1.9 percent this year
and 2.4 percent in 2013.

Industrial
vacancies are likely to improve from 11.7 percent in the first quarter of this
year to 10.9 percent in the first quarter of 2013 and rents to rise 1.8 percent
and 2.3 percent over the two years. 

Retail vacancy rates are forecast to
decline from 11.9 percent in the current quarter to 11.0 percent in the first
quarter of 2013 while average rents will increase 0.7 percent this year and 1.2
percent next year.

Article source: http://www.mortgagenewsdaily.com/02242012_commercial_real_estate.asp

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