Washington, DC, December 20, 2006--The commercial real estate markets are continuing to grow with record investment, and individual sectors in many areas seeing tighter vacancy rates and higher rents, according to the latest Commercial Real Estate Outlook of the National Association of Realtors.
Performance varies among the commercial sectors. The office and industrial markets continue to shine, supported by job growth and trade, while the rental apartment sector is seeing healthy rent increases. The retail sector is essentially flat, but the hotel industry is doing better than at any time since 2001.
Outside of the hotel sector, over $236.0 billion in commercial real estate transaction volume was recorded in the first ten months of 2006, up from $231.9 billion in the same period of 2005, not including properties valued at less than $5 million.
The NAR forecast for five major commercial sectors includes analysis of quarterly data for various tracked metro areas. The sectors include the office, industrial, retail, multifamily and hospitality markets. Metro data were provided by Torto Wheaton Research and Real Capital Analytics.
One of the most noteworthy things happening in commercial real estate today is the record level of capital flowing into commercial real estate. While many argue that this capital is the result of widespread risky loans, in actual fact, it is the large institutional investors, pension funds and foreign investors who are acquiring significant amounts of commercial real estate. Over $236 billion of commercial real estate transaction volume was recorded during the first ten months of 2006. This represents just those commercial properties valued at $5.0 million or more. Much of this increase in transaction volume is the result of portfolio trades, particularly within the office sector.
NAR Forecast: Institutions (pension funds, insurance companies) are among the most risk-adverse investors in commercial real estate. Institutional investors do not normally invest money if they think there is going to be a downturn in any investment vehicle. While regulators are concerned about an impending bubble bursting in commercial real estate, the evidence does not bear this out. The S & L crisis has not been forgotten by investors in commercial real estate.
