Gradual Improvement Forecast For Commercial Real Estate 11/8/2003
From: Walter Molony, 202-383-1177 or wmolony@realtors.org; Lucien Salvant, 202-383-1176 or lsalvant@realtors.org; both of the National Association of Realtors(r) SAN FRANCISCO, Nov. 8 -- The office, warehouse, retail and multifamily real estate markets can expect overall improvement through 2005, according to a forecast released at a commercial real estate forum during the annual National Association of Realtors(r) Conference & Expo. More than 23,000 Realtors(r) and guests are attending the Nov. 7-10 meetings in San Francisco. David Lereah, NAR's chief economist, said the forecast, part of the association's COMMERCIAL REAL ESTATE QUARTERLY, points to a gradual improvement in the major commercial sectors. "The commercial real estate market can generally expect absorption of space to rise and vacancy rates to decline over the next two years," he said. "The improving economy means there will be more job creation and a greater need for space, while a growing population will support multifamily housing." The NAR analysis covers a wide range of statistics and market rankings for the major commercial sectors in 54 markets tracked, including the office, warehouse, retail and multifamily markets, as well as market sector forecasts. It is produced with data provided by Property & Portfolio Research. -- Lereah noted the commercial sector has been relatively flat this year. "Although the housing market has been booming, the commercial real estate market has been lagging," he said. "The commercial real estate recovery has been taking some time to materialize because the growth in the economy hasn't translated into a stronger job market - but that will improve and should be apparent a year from now with unemployment expected to drop to 5.6 percent by the fourth quarter of 2004." Office vacancy rates in the 54 markets should decline to 16.4 percent in 2004 from an estimated 17.7 percent this year. Net absorption of office space, which includes leasing of new buildings coming on the market as well as space in existing properties, is projected to rise to 114.3 million square feet next year from only 37.9 million in 2003. Average office rents are expected to rise 6.3 percent next year and 5.0 percent in 2005 after increasing 5.2 percent this year. Warehouse net absorption is forecast at 55.2 million square feet in 2004, down from a projected 82.3 million this year, while the national vacancy rate is expected to drop to 9.3 percent next year from 10.4 percent in 2003. Warehouse rents are seen to decline an average of 2.4 percent this year and 0.3 percent in 2004. However, rents should rise 2.5 percent in 2005 with net absorption of warehouse space forecast to rise to 60.8 million square feet. In the retail sector, net absorption is projected at 112.7 million square feet for 2004 after reaching an estimated 98.9 million this year. The average vacancy rate for retail space in the 54 metro markets is forecast to drop to 11.5 percent next year compared with 12.3 percent for 2003. Retail rents should rise by 1.2 percent in 2004 and 1.6 percent in 2005 after slipping 0.8 percent this year. The apartment rental market - multifamily housing - is forecast to experience a net absorption of 164,300 units next year, up from 122.0 million anticipated in 2003. The average vacancy rate is expected to drop to 6.6 percent in 2004 from 7.1 percent this year, with average rent expected to rise 2.1 percent in 2004 and 3.0 percent in 2005 after declining 0.8 percent this year. The Realtors(r) Commercial Alliance, formed by NAR in 1999, serves the needs of the commercial market and the commercial constituency within NAR, including commercial members; commercial committees, subcommittees and forums; commercial real estate boards and structures; and NAR affiliate organizations. These organizations include the CCIM Institute, the Institute of Real Estate Management, the Realtors(r) Land Institute, the Society of Industrial and Office Realtors(r), and the Counselors of Real Estate. The RCA also provides commercial products and services. The National Association of Realtors(r), "The Voice for Real Estate," is America's largest trade association, representing more than 962,000 members involved in all aspects of the residential and commercial real estate industries. ------ -- Analysis by NAR; data provided by Property & Portfolio Research (PPR), which provides independent real estate research and portfolio strategy services to the institutional real estate community. Information about NAR is available at http://realtor.org. This and other news releases are posted in the Web site's "News Media" section under NAR News Releases. Statistical data and surveys may be found at http://realtor.org/research. |