According to the latest report from the US National Association of Realtors, not only is the multifamily housing sector in full recovery but the wider commercial property market is steadily clambering its way aboard the recovery lifeboat as well, with fundamentals gradually improving and the limited amount of new space being more easily absorbed in most of the major commercial real estate sectors.
Lawrence Yun, NAR chief economist, said the market has been slowly building momentum. "Job creation is the key to increasing demand in the commercial real estate sectors," he said. "The economy is expected to grow 2.5 percent next year, and with modest job creation, assuming there is no fiscal cliff, the demand for commercial space will gradually rise. The greatest friction that remains is a tight credit environment, notably for smaller properties."
The report forecast falling vacancy rates across the board, including 1 percentage point drop in the office vacancy rate between the final quarter of this year and Q4 2013, a 0.6% drop in the vacancy rate of industrial properties during the same period, -0.2% for retail property and -0.1% for multifamily. However, the markets tipped for the biggest fall in vacancy rates have the biggest rate to fall from, with the exception of the retail sector. The office sector has a current vacancy rate of 16.7%, the industrial sector 10.7%, the retail sector 10.8% and the multifamily sector has a current vacancy rate of 4% justifying significant rent increases.
"The primary factor holding back greater job creation has been uncertainty over regulations and associated costs," Yun said. "With the elections behind us and Washington apparently resolved to prevent a fiscal cliff, it's hoped that ambiguity over regulatory issues will clear relatively soon so employers can understand the rules of the game and the layout of the field."
- Tuesday 27 November 2012