The leasing market for all commercial property types is expected to begin a slow recovery this year, according to Grubb & Ellis Co.'s 2011 Real Estate Forecast. Activity in the investment market, which began its recovery earlier than anticipated in 2010, will expand beyond assets at the top and bottom of the quality scale to include properties with slightly more risk, the company's analysts say.
According to the report, foreclosures continue to add shadow supply to the availability of rentals, but modest job growth and a lack of home buyers is causing the number of renter households to outpace that shadow supply. This, in turn, will result in a relatively quick recovery for the multifamily housing sector. Grubb & Ellis says the top markets for multifamily housing will be New York; San Francisco; Long Island, N.Y.; San Jose, Calif.; and Los Angeles. Generation Y will further boost apartment demand across all markets.
The office market, on the other hand, will continue to lag without faster job growth, the firm projects. Employers are likely to add just 1.5 million net new payroll jobs this year, leading Grubb & Ellis to describe the office market's recovery in 2011 as ‘half speed.’ The sector's vacancy rate peaked last year at 17.9% in the second quarter – just 10 basis points lower than its all-time high in the past 24 years. Grubb & Ellis expects the rate to drop to 17% this year and 15.9% next year.
One of the most pronounced trends resulting from the recession is a ‘new normal’ for the retail industry, the report adds. As was the case last year, 2011 will see retailers repositioning stores to create leaner, more effective organizations and securing high-profile locations that are now available at lower rates.Â
Despite these changes in the landscape, retail leasing activity has revived more quickly than originally expected, with luxury retailers, in particular, on their way to recovery.
The complete 2011 forecast can be found here.
SOURCE: Grubb & Ellis Co.
