The U.S. commercial real estate industry showed evidence of gradual recovery in the first quarter, according to the latest analysis from Los Angeles-based CBRE Group Inc.
‘Retail locations and warehouse buildings had their best quarter in terms of vacancy/availability declines in several years as a result of a more confident consumer,’ says Jon Southard, managing director of CBRE's Econometric Advisors group. ‘Higher spending on consumer goods led to improved occupancy in both property types. Recovery also remained on track in multifamily and office, although demand did not dramatically outpace new supply during the quarter in either of these sectors.’
During the first quarter, the U.S. office vacancy rate of 15.3% was 70 basis points (bps) below last year's first quarter vacancy rate. In the first three months of this year, suburban markets continued to outpace their downtown brethren. Suburban vacancy fell by 10 bps to 17%, while the downtown rate remained unchanged at 12.4%.
CBRE found that local office market performance was mixed, with falling vacancy in half of the markets tracked (31 of 63). The best performers in the first quarter were smaller markets; Austin and Las Vegas led all markets with vacancy rate declines of 120 bps each.
In the industrial sector, the first quarter availability rate of 12.3% is now 230 bps below its recession peak. CBRE determines that the recovery is broadly based, with 48 markets posting declines, seven showing increases, and five unchanged from a quarter ago. Some of the nation's manufacturing markets – specifically those with heavy exposure to the nation's auto industry – led the industrial recovery during the quarter, with Detroit (-150 bps) and Cincinnati (-110 bps) particular standouts.
In the retail sector, the first quarter availability decline of 30 bps, to 12.5%, was the largest since 2005. Notably strong performers included Richmond, Va.; Charlotte, N.C.; Cleveland; Memphis; and Phoenix – each recorded a decline of 60 bps or more. On the other end of the spectrum, Tampa and Fort Lauderdale, Fla., and Birmingham, Ala., saw availability rate increases of 30 bps or more.
In the multifamily housing sector, the vacancy rate for professionally managed apartment units stood at 5.1% in the first quarter, unchanged from a year ago. This is the first time since 2009 that national vacancy did not decline from a year ago and a third of the markets posted vacancy increases of 50 bps or greater on a year-over-year basis. Despite the slower growth in demand, the market remains tight by historical standards, with the four-quarter trailing average staying at 4.9%, or 40 bps below the long-term (20-year) norm. Compared to a year ago, vacancy rates declined in 23 of the 63 markets monitored.
