At the tail end of last year the team at CB Richard Ellis Econometrics Advisors released a mini-report titled We'll Have to Muddle Through Somehow, in which they gave a prediction that 2012 would be "slightly better" than 2011, which was slightly better than 2010, but gave in the form of a song to be "sung to the tune of have yourself a merry little Christmas". Few would have argued with what has to be called very snugly prediction indeed.
However, according to new data released by CBRE today on the fourth quarter of last year, the commercial real estate market in the US (including the multi-family housing sector - apartments) was heading for a strong start to the year, maybe strong enough to do slightly better than slightly better.
According to the report the office vacancy rate in the US fell by 50 bps during 2011, to end the year at 16%. Downtown submarkets slightly outperformed their suburban counterparts compared to Q4 2010, with a decline of 60 bps compared to a 40-bps drop for the suburbs.
Nevertheless, the recovery continues to be as patchy and uneven as ever, with the vacancy rate in places heavily exposed to the technology sector such as San Francisco and Seattle, which saw their office vacancy rates down by 90 bps and 100 bps respectively.
The markets that faced the most severe of housing bubbles have also done well according to CBRE as "despite facing continued weak housing market conditions, made significant occupancy gains as tenants took advantage of lower office rents". Jacksonville rocked the show with a 210 bps fall in the vacancy rate, but Orlando, Miami and Riverside made for honourable mentions.
Industrial and Retail
The industrial market also had a strong finish to 2011, with vacancies down 80 bps to 13.5%. Retail, wasn't quite so good; rather than experiencing a fall in availability CBRE simply reports and end to relentless growths in availability. The report says:
"At 13.2%, Q4 2011 retail availability - while unchanged from the previous quarter - was 20 bps higher than the rate at the end of 2010. However, the stabilization of retail availability during the second half of 2011 marked an end to the relentless increases that characterized the retail real estate market since the recent recession."
Apartment vacancies ended the year at just 5.3%, a 70 bps drop compared to Q4 2010. CBRE also report vacancy rates down in 52 of the 60 markets it tracks. The best performing markets of 2011 were Dayton, Memphis, Cleveland, Detroit, Kansas City, Houston, Columbus, Dallas, Charlotte, Cincinnati and Los Angeles, which all saw vacancy rates down by 150 bps or more. Meanwhile Pittsburgh, San Diego, Minneapolis, San Jose, Boston, Newark, San Francisco, Miami, Oakland, Los Angeles, Cleveland and Portland also vacancy rates fall by 4 bps or less.
- Thursday 12 January 2012