The National Association of Realtors (NAR) has released its quarterly commercial real estate forecast, and the information is very interesting. According to the Association, there are positive underlying factors supporting all major commercial real estate sectors, but a combination of tight financial lending practices and a slower job market in the second quarter are affecting growth in some areas.
According to the report, warehouse and industrial space is performing better overall. Trade with Canada, Brazil and Mexico is doing well. The situation with Asian nations, including China and India, is described as “robust,” while exports to Europe are down.
The commercial real estate cycle is being driven by shifts in market demand without an overabundance of new construction projects bringing units onto the market. Since 1999, the typical vacancy rate has been hovering around the 14.4 per cent mark in the office market. For industrial and retail properties, the vacancy rate has been slightly lower at 10.1 and 8.1 per cent, respectively.
Vacancy rates are declining slightly in all sectors, and rents for commercial properties are on the rise. A number of corporations are putting off making hiring decisions until after the upcoming presidential election, citing concerns over issues like health care and banking regulations. Instead, they are holding onto their cash reserves for the time being.
The NAR Commercial Real Estate Outlook for the U.S. contained the following projections:
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