NAR Sees CRE Market Conditions Improving Next Year


NAR Sees CRE Market Conditions Improving Next Year Noting that vacancy rates on commercial properties are easing, the National Association of Realtors (NAR) predicts a modest improvement in commercial real estate fundamentals next year.

Vacancy rates have ‘already peaked or will soon top out,’ says Lawrence Yun, NAR's chief economist.

‘The 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,’ he says. ‘Still, high vacancy rates imply falling rents.’

Vacancy rates will improve most dramatically in the industrial sector, falling by about 70 basis points by the end of the fourth quarter of 2011, according to projections included in NAR's latest commercial real estate outlook report. Vacancy rates currently range from a low of 6.4% in the multifamily area to a high of 16.7% in the office sector.

Yun anticipates a rise in household formation due to an improving economy, which will increase demand for housing, both ownership and rental. Multifamily housing will likely outperform other commercial real estate property types, he adds.

‘Apartment rents could rise by one to two percent in 2011, after having fallen in 2009 and no growth in 2010,’ Yun says. ‘This rent rise, therefore, could start to force up broader consumer prices as well.’

SOURCE: National Association of Realtors

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