Friday
October 24, 2014

Multifamily Market Drives Commercial Rebound

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Multifamily Market Drives Commercial Rebound

Commercial real estate continues to show gradual improvement, despite sluggish economic growth. The biggest growth area is in the multifamily sector, according to the National Association of REALTORS®' latest quarterly commercial real estate forecast

"The multifamily sector continues to be the top-performer in commercial real estate with the lowest vacancy rates," says Lawrence Yun, NAR's chief economist. "However, tight availability — despite new construction — is causing rents to currently rise near 4 percent annually in many markets. Many renters who are getting squeezed may begin to view home ownership as a more favorable, long-term option."

Here is an overview of NAR's forecast of the four main commercial sectors: 

Office Markets

Vacancy rates are expected to decline about 0.2 percent to a forecasted 15.8 percent in the second quarter of this year — then they will slip to 15.6 percent in the second quarter of 2015. The markets with the lowest office vacancy rates are New York City and Washington, D.C., both at 9.4 percent. Office rents are expected to rise 2.5 percent in 2014 and 3.2 percent in 2015.

Industrial Markets

Vacancy rates are projected to fall from 9 percent in the second quarter of this year to 8.7 percent in the second quarter of 2015. The metros with the lowest industrial vacancy rates are Orange County, Calif. (3.5 percent) and Los Angeles (3.9 percent). Industrial market rents are projected to rise 2.4 percent this year and 2.6 percent in 2015.

Retail Markets

Vacancy rates are projected to fall from 10 percent to 9.8 percent by the second quarter of 2015. The markets with the lowest retail vacancy rates are San Francisco (3.2 percent) and Fairfield County, Conn. (3.8 percent). Retail rents are projected to rise 2 percent in 2014 and 2.3 percent next year. 

Multifamily Markets

Vacancy rates are expected to rise 4 percent in the second quarter of this year to 4.1 percent in the second quarter of 2015, as added supplies catches up to the growing demand, according to NAR. The areas with the lowest multifamily vacancy rates are New Haven, Conn. (2.3 percent) and Ventura County, Calif. (2.4 percent). Apartment rents are projected to rise 4 percent this year as well as in 2015. 

Source: National Association of REALTORS®

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