Vacancy Rates Decline but Rent Recovery Delayed
The overall forecast for the commercial market reported for Q1 – 2011 by NAR chief economist Lawrence Yun is stabilization. But Yun thinks that most market rents will remain soft except for multifamily. A pullback in construction is helping stabilize the market. Yun said, “Very limited construction of new commercial real estate over the past few years has essentially fixed the supply of available space. This means vacancy rates could fall quickly from any increase in demand for commercial space,” he added.
Lowest office vacancy: New York City and Honolulu, with vacancies in the 8 to 9 percent range. In 57 markets tracked, net absorption of office space, including new space and space in existing properties, should be 14.5 million square feet in 2011.
Areas with the lowest industrial vacancy rates: Los Angeles and Salt Lake City, with vacancies of 7.5 percent. Annual industrial rent is likely to decline 2.5 percent in 2011, then rise 3.0 percent next year. Net absorption of industrial space in 58 markets tracked should be 127.5 million square feet in 2011.
Lowest retail vacancy rates: San Francisco; Miami; Honolulu; and Long Island, N.Y., all with vacancies in the 7 to 8 percent range. Net absorption in 53 tracked markets is projected to be 4.8 million in 2011.
Market tightening as the economy improves. Areas with the lowest vacancy rates presently are San Jose, CA; Pittsburgh; and Newark, NJ, with vacancies in a range around 3 percent. Multifamily net absorption should be 207,000 units in 59 tracked metro areas in 2011.