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NAR Expects Growth in Commercial Real Estate Markets in 2012

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Staff Writer |

WASHINGTON — Commercial real estate markets have been relatively flat this year, but improving fundamentals mean a more positive trend is expected in 2012, according to the National Association of Realtors®.

“Vacancy rates are flat, leasing is soft, and concessions continue to make it a tenant’s market,” says Lawrence Yun, NAR chief economist. “However, with modest economic growth and job creation, the fundamentals for commercial real estate should gradually improve in the coming year.”

The commercial real estate market is expected to follow the general economy. “Vacancy rates are expected to trend lower and rents should rise modestly next year. In the multifamily market, which already has the tightest vacancy rates in any commercial sector, apartment rents will be rising at faster rates in most of the country next year. If new multifamily construction doesn’t ramp up, rent growth could potentially approach 7% over the next two years,” Yun says.

Looking at commercial vacancy rates from the fourth quarter of this year to the fourth quarter of 2012, NAR forecasts vacancies to decline 0.6% in the office sector, 0.4% in industrial real estate, 0.8% in the retail sector, and 0.7% in the multifamily rental market.

Retail vacancy rates are likely to decline from 12.6% in the current quarter to 11.8% in fourth-quarter 2012. Markets with the lowest vacancy rates today include San Francisco (3.7%); Long Island, N.Y., and northern New Jersey (each at 5.7%); and San Jose, Calif., at 6%.

The apartment rental market is expected to see vacancy rates drop from 5% in the fourth quarter to 4.3% in fourth-quarter 2012. Areas with the lowest multifamily vacancy rates today are Minneapolis (2.4%), New York City (2.7%) and Portland, Ore. (2.8%).

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