Falling vacancy rates and modest rent growth are predicted for each of the major commercial real estate sectors, according to the National Association of Realtors’ (NAR) quarterly commercial real estate forecast released Aug. 26.
NAR is forecasting commercial vacancy rates nationwide to decline 0.2 percentage points in the office sector and 0.6 points in both the industrial and retail sectors. Lawrence Yun, NAR’s chief economist, said the multifamily vacancy rate is not expected to change much as the sector will continue to have the tightest levels of availability.
“Office vacancies haven’t declined much because total jobs today are still below that of the pre-recession level in 2007, but rising international trade is boosting demand for warehouse space,” Yun said. “Consumer spending has been favorable for the retail market, and rising construction is keeping apartment availability fairly even, though at low vacancy levels.”
Lower vacancies are continuing to have an especially pronounced effect on the multifamily sector’s rental rates, according to Yun.
“That, in turn, is pushing apartment rents to rise twice as fast as broad consumer prices and average wage growth,” he said.
Average apartment rents will rise 4 percent in 2013 and another 4 percent next year, according to NAR’s forecast. However, NAR said that with new construction rising to meet increased demand in the multifamily sector, it will likely see vacancy rates edge up only a tenth of a percentage point, from 3.9 percent in the third quarter to 4.0 percent in the third quarter of 2014.
NAR is estimating that vacancy rates in the office sector are expected to decline from a projected 15.7 percent in the third quarter of 2013 to 15.5 percent in the third quarter of 2014.The industrial vacancy rates are projected to fall from 9.3 percent in the third quarter of this year to 8.7 percent in 2014. Retail vacancy rates are expected to decline from 10.6 percent in the third quarter of this year to 10 percent in the third quarter of 2014.
When it comes to rent growth in the other sectors, NAR expects office rent to increase 2.5 percent this year and 2.8 percent in 2014. Industrial rents are expected to grow by 2.4 percent this year and 2.6 percent in 2014, and retail rents are likely to increase 1.5 percent in 2013 and 2.3 percent in 2014.