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

Multi-family rentals are leading thernrecovery in the commercial real estate market, becoming what the NationalrnAssociation of Realtors® (NAR) calls “a landlord’s market commanding biggerrnrent increases.”  NAR, in its quarterlyrncommercial real estate forecast said that all of the major commercial realrnestate sectors are seeing improved fundamentals, but seems most bullish about thernmulti-family sector.</p

NAR is projecting that vacancies in thernapartment rental market is likely to drop from 4.7 percent in the first quarterrnof 2012 to 4.5 percent in the first quarter of 2013.  Multifamily vacancy rates below 5 percent arerngenerally considered to indicate a landord’s market with demand justifyingrnhigher rents.</p

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

The areas with the lowest multi-familyrnvacancy rates are New York City, 1.8 percent; Minneapolis and Portland, Oregonrnat 2.5 percent each, and San Jose, California at 2.7 percent.</p

NAR Chief Economist Lawrence Yun said, “Household formation appears to be rising from pent-uprndemand.  The tight apartment marketrnshould encourage more apartment construction.  Otherwise, rent increasesrncould further accelerate in the near-to-intermediate term.”</p

Forecasts for the other commercialrnsectors are also positive.  Vacancies inrnthe office sector are expected to decline 0.4 percent point from the currentrnrate of 16 percent over the next year and rent may go up 1.9 percent this yearrnand 2.4 percent in 2013.</p

Industrialrnvacancies are likely to improve from 11.7 percent in the first quarter of thisrnyear to 10.9 percent in the first quarter of 2013 and rents to rise 1.8 percentrnand 2.3 percent over the two years.  </p

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

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