Commercial Real Estate Sees Mixed Results

Washington, DC, Aug. 27, 2012 -- Positive underlying fundamentals continue to support all of the major commercial real estate sectors, but a slowdown in job creation and ongoing tight loan availability has tempered growth in some areas, according to the National Association of Realtors quarterly commercial real estate forecast.

Lawrence Yun, NAR chief economist, said there are mixed results among the commercial sectors.

“Job creation in the second quarter was about half of what we saw in the first quarter, which is moderating demand in the office sector,” he said.

“Industrial and warehouse space is holding on better because imports and exports have advanced. While exports to Europe generally are down, trade has been robust with India, China and other Asian nations, along with Brazil, Mexico and our strongest trading partner – Canada.”

Although still positive, dampened demand is slightly moderating rent growth with the exception of the multifamily market.

“Sharply higher demand for apartments is causing rents to rise at faster rates,” Yun said.

“A return to normal household formation will mean even lower vacancy rates and higher rents in the future.”

The current commercial real estate cycle has been driven by shifts in demand without an oversupply of new construction.

“The difficulty small businesses have in getting commercial real estate loans for leasing or purchase is keeping a lid on demand,” Yun said.

“Multifamily is the only commercial sector with a notable growth in new space, with some lending provided through government loans.”

With the exception of multifamily, vacancy rates remain above historic averages seen since 1999. Over that timeframe the typical vacancy rate has been 14.4 percent for the office market, 10.1 percent in industrial, 8.1 percent for retail and 5.8 percent in multifamily.

Vacancy rates are marginally declining and rents are modestly rising in all of the sectors, but significant changes in the outlook are unlikely before the end of the year.

Many corporate decisions on spending and job hiring are on hold given uncertainty over the upcoming elections, whether Congress will effectively avoid a “fiscal cliff,” and unsettled issues such as health care and banking/financial regulations.

"Overall companies hold plentiful cash reserves, but they are hesitant to hire without clarity over how these outstanding issues will impact the bottom line,” Yun said.

"Commercial real estate gains could be thwarted if lending from small and community banks dry up from excessive regulatory compliance costs, and if international big-bank capital rules are applied to smaller lending institutions.”



Other Archived Articles

NAFCD Urges Members To Support Habitat Stores   Full Article
Chicago, IL, Nov. 11, 2014 -- The North American Association of Floor Covering Distributors Association is urging its members to support Habitat for Humanity's ReStores by donating materials and products.

Former Mannington VP Hollinger Dies   Full Article
Kennett Square, PA, Nov. 11, 2014 -- Mark A. Hollinger, age 58, a long-time Mannington Mills employee, died Nov. 5 after a year long battle with glioblastoma multiforme.

Desso Using Water Company Waste in Carpet Tile   Full Article
Waalwijk, The Netherlands, Nov. 11, 2014 -- Carpet company Desso said it is using chalk from local water companies to make its products.

Investment Adviser Reduces Stake in Armstrong   Full Article
Boston, MA, Nov. 11, 2014 -- Wellington Management Company of Boston has reduced its stake in Armstrong World Industries to less than 5% of the firm.

Mr. David's Founders Named Persons of Year   Full Article
Chicago, IL, Nov. 11, 2014 -- David and Leonard Zmijewski, the founders of Mr. David's Flooring International, have been named Persons of the Year by the Chicago Floor Covering Association.

Dover Rug & Home Wins Philanthropy Award   Full Article
Natick, MA, Nov. 10, 2014 -- Dover Rug & Home said it is the recipient of the 2014 Community Excellence Award, given by the Family Business Association of Massachusetts.

More Home Refinancers Taking Cash at Closing   Full Article
Washington, DC, Nov. 10, 2014 -- Borrowers cashed out an estimated $8 billion in home equity through refinancing of conventional mortgages in the third quarter, according to Freddie Mac’s quarterly refinancing report.

Berkshire Hathaway Reports Lower Sales and Earnings for Shaw   Full Article
Omaha, NE, Nov. 10, 2014 -- Berkshire Hathaway reported third quarter net earnings of $4.6 billion, or $2,811 a Class A share, compared with $5 billion, or $3,074 a share, a year earlier.

Existing Home Sales Expected To Pick Up Next Year   Full Article
Washington, DC, Nov. 10, 2014 -- Sales of previously-owned homes next year may hit the fastest pace since 2006, according to the National Association of Realtors.

Former Starnet Chairman Wins Mayoral Election   Full Article
Point Pleasant, NJ, Nov. 7, 2014 -- Former Starnet chairman Bob Sabosik won his bid for mayor in Tuesday's elections in Point Pleasant.

Mohawk CEO Lorberbaum Discusses Firm's Growth   Full Article
Chattanooga, TN, Nov. 7, 2014 -- Mohawk Industries CEO Jeff Lorberbaum told the Chattanooga Rotary Club that his firm is investing $500 million in its existing businesses in a bet on an improving economy.

Economy Adds 214K Jobs, Unemployment Falls   Full Article
Washington, DC, Nov. 7, 2014 -- Employers added 214,000 jobs in October and the unemployment rate fell again, the Labor Department said.

Attendance at Cersaie Rises This Year   Full Article
Bologna, Italy, Nov. 7, 2014 -- Attendance at Cersaie 2014, the international exhibition of ceramic tile and bathroom furnishings held in Bologna in September, once again topped 100,000 visits, according to organizers.

Builders More Confident in Senior Housing Market   Full Article
Washington, DC, Nov. 7, 2014 -- Builder confidence in the 55+ housing market was up again in the third quarter, according to the latest release of NAHB’s 55+ Housing Market Index.

Housing Markets Improving at a Gradual Pace   Full Article
Washington, DC, Nov. 6, 2014 -- Markets in 59 of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the third quarter.

Planned Job Cuts Surge in October   Full Article
Chicago, IL, Nov. 6, 2014 -- Planned job cuts jumped 68% in October to the second-highest total this year, according to outplacement consultancy Challenger, Gray & Christmas.

Initial Jobless Claims Fall Again   Full Article
Washington, DC, Nov. 6, 2014 -- Initial claims for unemployment benefits fell by 10,000 to 278,000 in the week ended Nov. 1, the Labor Department said

Grosser Named Tile Person of Year   Full Article
San Antonio, TX, Nov. 6, 2014 -- Tile Council of North America presented its Tile Person of the Year award to Donato Grosser at the Total Solutions Plus event.

NWFA Renews Agreement With Wildlife Fund   Full Article
St. Louis, MO, Nov. 6, 2014 -- The National Wood Flooring Association said it has renewed its Memorandum of Understanding with the World Wildlife Fund.

Tarkett Hosts Second Sustainability Summit   Full Article
Chagrin Falls, OH, Nov. 6, 2014 -- Tarkett recently hosted its second annual Sustainability Summit in Cleveland, Ohio.