Modest Growth forecast for US Commercial Markets

Posted on 7 June, 2015 by Jodee Redmond

The National Association of Realtors’ (NAR) quarterly commercial real estate forecast predicts a gradual increase in demand in the US commercial market over the next year.

ID:26674871

National office vacancy rates are expected to decrease slightly (0.1 per cent) as the demand for office space gradually improves.

Industrial vacancy rates will likely follow suit, declining by 0.3 per cent. Retail space will also see a dip of 0.4 per cent as manufacturing output gets a boost; low gas prices and slight gains in income will lead to consumers opening their wallets.

Lawrence Yun, NAR’s chief economist, commented recently that the commercial real estate sector is “on the path to recovery” but factors such as lack of financing available to small investors, sub-par economic growth and the current business trend of squeezing more employees into existing spaces will serve to keep demand from accelerating meaningfully.

Office Markets

Office vacancy rates are projected to decline from 15.6 per cent in Q2 of 2015 to 15.5 per cent of Q2 of 2016. The markets with lowest vacancy rates in the second quarter are:

  • New York City (8.9 per cent)
  • Washington, D.C. (9.0 per cent)
  • San Francisco (10.6 per cent)
  • Little Rock, Ark (11.6 per cent)
  • Portland, Ore (11.6 per cent)

Industrial Markets

Industrial vacancy rates are likely to drop from 8.4 per cent in Q2 to 8.1 per cent in Q2 of 2016. Areas with the lowest industrial vacancy rates currently are as follows:

  • Orange County, California (3.4 per cent)
  • Los Angeles (3.6 per cent)
  • Miami (5.3 per cent)
  • Seattle (5.4 per cent)
  • Palm Beach, Florida (5.5 per cent)

Retail Markets

Vacancy rates in the retail markets are predicted to drop from their current rate of 9.6 per cent to 9.2 per cent in the second quarter of 2016. Markets with the lowest retail vacancy rates are:

  • Orange County, California (4.6 per cent)
  • San Jose, California (4.6 per cent)
  • Fairfield County, Conn. (4.7 per cent)
  • Long Island, N.Y (4.9 per cent)

As long as jobs are being added at a “respectable pace,” the demand for commercial real estate should increase gradually, the forecast concludes.




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