The National Association of Realtors has a strong outlook on the overall commercial real estate industry. Its quarterly report notes that most property sectors are improving, and breaks down the best locales in different asset types as well.
Every major commercial real estate sector is forecast to have a vacancy rate decrease with the exception of multifamily. The reason for this is that there will be a boom in apartment construction over the next year.
Retail real estate nationally should see the biggest vacancy rate decline, at 0.4 percent. Retail real estate rents are forecast to grow 2.6 percent over the year and an additional 3.1 percent in 2016. This is mainly due to a decline in construction in the sector since the recession. The nation’s number one market for vacancy rates is currently San Francisco, at a tight three percent.
Office rents are also on the rise. NAR sees a 3.4 percent jump nationwide this year and 3.7 percent next year. New York City’s vacancy rate is the slightest in the country, at 8.9 percent, followed by Washington, D.C.’s nine percent. NAR also expects 51.8 million square feet to get absorbed by the end of the year in the sector.
On the industrial front, vacancies are getting much tighter. They’re expected to fall from 8.4 percent in this year’s quarter to 8.1 percent during the same period in 2016. Orange County’s 3.4-percent rate and the 3.6 percent in Los Angeles are leading the way due to their huge port and manufacturing infrastructures.
Meanwhile, despite what we said earlier, multifamily, commercial real estate’s darling is doing just fine. Vacancy rates are only expected to increase to 4.4 percent during the second quarter from 4.3 percent in the first quarter. Meanwhile, although there is an absorption rate of 172,524 units forecast this year and 153,747 in 2016, rents are still expected to rise. We should see a 3.6-percent jump in 2015 and a smaller 3.3 percent next year.
Regardless of the property type, GRS Group is ready to help any developer, broker or investor with their commercial real estate due diligence needs.