In recent months, several reports have indicated that commercial real estate occupancy rates in many locales have improved at an unexpectedly rapid pace. This also rang true for commercial real estate on the national level, though a new report has revealed that the sector’s recovery slowed in the second quarter of this year, likely the result of tightened small business loan availability.
The National Association of Realtors recently released its quarterly commercial real estate forecast. According to NAR, much of the decreased pace can be attributed to the credit crunch businesses faced in the first two quarters of the year, as well as a slight slowdown in job creation.
“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,” NAR chief economist Lawrence Yun explained. “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.”
An important piece of information to remember, though, is that the commercial real estate sector has continued to improve, just at a slower pace than was recorded in previous quarters.
NAR reported on several specific markets, and found the multi-family category to be almost entirely untouched by economic issues, as that sector continues on its torrid path of increased occupancy.
The latest Commercial Real Estate Outlook from NAR projects the office space market to experience a 7 percent decline in vacancies – from 16.1 percent to 15.6 percent – between the third quarter of this year and the same period in 2013. Additionally, it believes office-space rent will increase 2.0 percent year-over-year in 2012, as well as another 2.6 percent next year.
This serves as a clear sign that the time is right for purchasing commercial real estate, as rent rates will continue to increase as vacancy declines. If you need a commercial real estate loan, consider using a service like BoeFly to ensure the most efficient loan application process. The firm has thousands of participating lenders, and requires only one loan application from prospective borrowers.
NAR’s projections further suggest that vacancies in the industrial and retail commercial real estate markets will fall at a very slow pace between the latter half of this year and third quarter 2013. Industrial vacancies are expected to fall 0.2 percent, to 10.5 percent by the third quarter of next year, while retail will likely drop from 10.9 percent to 10.7 percent next year.
This forecast does look far into the future, and as such could prove inaccurate depending on the availability of credit for commercial real estate purchases. As government data recently indicated an improvement in export-to-import ratios, demand for and purchases of commercial real estate could increase at a more rapid pace.