The U.S. commercial real estate market continued to show moderate improvement across all property sectors in the third quarter of this year, according to the latest analysis from CBRE Group Inc.
Vacancy in the nation's office buildings continued to decline, falling 20 basis points (bps) during the third quarter to 15.5%. The vacancy rate has declined by 70 bps on a year-to-year basis. During the third quarter, the national suburban vacancy rate fell by 10 bps to 17.3%, while the national downtown vacancy rate also fell by 10 bps to reach 12.4%. Occupancy improved in 36 markets, including 16 markets where vacancy decreased by at least 50 bps.
National industrial availability dropped 10 bps during the quarter to 13.1%, continuing a two-year favorable trend. Over the past two years, the industrial market has seen a slow but steady decline in availability, which is now 150 bps below its pre-recession peak. CBRE says that the recovery continues to be broad-based, with 36 markets reporting declining availability rates, 15 showing an increase and nine unchanged.
Retail properties continued to see modest improvement in availability, which fell 10 bps to 12.9% from the previous quarter; the sector is down 30 bps compared to the rate one year ago. A majority of the retail markets recorded either flat or declining availability rates compared to the second quarter.
The demand for the nation's apartment buildings continued to be strong, according to CBRE, with vacancy at 4.6%, a decrease of 40 bps from a year ago. The four-quarter trailing average remains near 5%, or 30 bps below the long-term (20-year) average.
‘Real estate occupancy continues to improve slowly, mirroring the sluggish economic recovery,’ says Jon Southard, managing director of CBRE's econometric advisors group. ‘However, local conditions continue to vary widely. The majority of markets did see more space occupied than in the prior quarter, but in many markets, the occupancy increase was not enough to significantly decrease the total space available.’