Most of the major commercial real estate sectors show gradually improving fundamentals and are easily absorbing the relatively small amount of new space that is coming online, with a full recovery already in the multifamily market, NAR says in its quarterly commercial real estate forecast.
Fundamentals are improving in all major commercial real estate sectors, suggesting the industry is shaking off the impact of the prolonged recession, NAR says in its quarterly commercial real estate forecast. In all sectors, vacancies are dropping and rental rates are rising.
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.”
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.