A stabilization trend is taking place in commercial real estate sectors, but in most markets rent will remain soft except for multifamily rentals. “Very limited construction of new commercial real estate over the past few years has essentially fixed the supply of available space,” says Lawrence Yun, NAR chief economist. “This means vacancy rates could fall quickly from any increase in demand for commercial space.”
chief economist
Pending Home Sales Ease Slightly
NAR’s™ forward-looking index for January is down 2.8 percent, suggesting existing-home sales will remain relatively stable in the months ahead. Rising oil prices from unrest in oil-producing regions is starting to pose a concern.
Commercial Markets Stabilizing
Commercial real estate markets are flattening out, with modestly improving fundamentals expected in 2011, NAR says. ‘œThe basic fundamental of rising commercial leasing demand, resulting from a steadily improving economy, means overall vacancy rates have already peaked or will soon top out,’ says NAR Chief Economist Lawrence Yun. ‘œThe outlook for the office and industrial markets has moderated with modestly declining vacancy rates expected as 2011 progresses, while the retail sector should hold fairly steady. Still, high vacancy rates imply falling rents.’ Yun anticipates a rise in household formation from an improving economy, which will increase demand for housing, both ownership and rental.
Commercial: Improving, Although Credit Remains Issue
Multifamily is the commercial sector faring best right now. It’s™ seeing vacancies shrink and absorption improving, although rental rate gains are modest at best. The other sectors are improving a little, too. Vacancies are still heading in the wrong direction and absorption isn’™t where it could be if financing didn’™t remain so challenging to get. NAR Chief Economist Lawrence Yun thinks credit could start loosening as banks, sitting on lots of cash, feel pressure to start lending again. Yun gave his outlook last week at the NAR Conference & Expo. Access a summary and his slides.
