Commercial real estate is making progress in all sectors, according to the latest Commercial Real Estate Outlook report from the National Association of REALTORS (NAR). The quarterly report reviews statistics on 54 of the nation’s largest markets, including Boston, and examines market trends in office, multi-family, industrial, retail and hospitality real estate.
The star of the report is the multi-family sector, with vacancies continuing to fall while market rents press higher. NAR projects that multifamily housing nationwide will see vacancy rates continue to decline modestly into 2014 to 3.9%. Most of the major metropolitan areas have seen vacancy rates holding under 5%, presenting a landlord’s market.
Average apartment rents are expected to increase 4.6% in 2013 and 4.7% in 2014, after rising 4.1% in 2012. Multifamily net absorption is projected at 270,600 units in 2013 and 253,200 during 2014.
Vacancies are also declining for office and retail space. Vacancy rates in the office sector are expected to fall from 16.0% in the first quarter of 2013 to 15.6% in the first quarter of 2014.
Office rents are expected to increase 2.6% in 2013 and 2.8% in 2014, after seeing a 2.0% gain during 2012. Net absorption of office space is expected to total 34.0 million square feet this year and 42.3 million in 2014.
Meanwhile, retail vacancy rates are expected to drop from 10.7% in the first quarter of 2013, to 10.4% in the first quarter of 2014. Average retail rents will probably rise 1.5% in 2013 and 2.1% in 2014, following a 0.8 percent gain in 2012. Net absorption of retail space is should be 11.9 million square feet in 2013 and 16.4 million square feet in 2014.
The industrial sector should also see continued, modest declines in vacancy rates, from 9.6% in the first quarter of 2013 to 9.2% in the first quarter of 2014. Industrial rents are projected to rise 2.3% this year and 2.6% in 2014. Net absorption of industrial space is expected to total 121.8 million square feet in 2013 and 103.5 million in 2014.
Please keep in mind that these are national averages and projections. Commercial real estate is highly dynamic and highly local; the Boston Metro Area commercial real estate market is ahead of the national curve in many respects. See our February 22 blog post for an example.
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