Commercial Real Estate Soft in Fourth Quarter

Washington, DC, Feb. 23, 2010--Fallout from the recession continued to hurt commercial real estate in the fourth quarter, but there is hope for some improvement next year, according to the National Association of Realtors.

Lawrence Yun, NAR chief economist, said commercial real estate almost always lags the economy. “Because of the lingering impact from the deep recession over the past two years, vacancy rates will trend higher and many commercial property owners will need to make rent concessions,” he said.

“With the job market expected to turn for the better later this year, we’ll see rising demand for office and warehouse space, but that isn’t likely before 2011,” Yun said. “At the same time, improved consumer confidence would help sustain the retail sector and encourage more people to enter the rental market.”

Yun noted that commercial vacancy rates remain high in most market areas and are depressing rents.

Yun also said that commercial credit is still lacking.

“Given that about $1.4 trillion in commercial debt will come due over the next three years, more extensive action is needed and the Fed needs to more actively help resuscitate commercial mortgage-backed securities. The credit improvement will mean more commercial property sales in 2010, even some at deeply discounted prices.”