REALTORS®’ Commercial Markets Maintain Momentum in Second Quarter 2012

Commercial real estate in REALTOR® markets continued on a stabilizing path during the second quarter of 2012. Based on the results of the July Commercial Real Estate Market Survey, market activity at the national level posted improvements compared with the first quarter of the year.

On the leasing side, activity rose four percent over the previous quarter, indicating rising demand. On the supply side, new construction is showing signs of improvement. Vacancies declined for all property types, except office. Industrial rates declined 15 basis points, to 15.5 percent while retail rates decreased 50 basis points, to 15.8 percent. Multifamily properties recorded vacancies of 7.2 percent in the second quarter, down 14 basis points from the first quarter. Office availability rates rose from 18.0 percent in the first quarter to 24.7 percent in the second quarter.

Declines in availability led to lower levels of rent concessions. The decline in rental rates also continued slowing, moving towards equilibrium. In terms of space size, tenant demand for space increased in three size categories: 2,500-4,999 sq. ft.; 7,500-9,999 sq. ft.; and 10,000-49,999 sq. ft. Lease terms remained steady, with 36-month and 60-month leases capturing the bulk of the market.

Investment sales rose 3.0 percent from the second quarter. Nationally, 69.0 percent of REALTORS® reported completing a sales transaction during the quarter. Compared with a year ago, sales advanced 12.0 percent, indicating increased investor interest. Prices continued their decline, decreasing five percent compared with a year ago. Cap rates rose for all office properties, except hotels.

The average transaction price remained steady at $1.1 million in the second quarter. Commercial practitioners continued to find financing as the top obstacle in closing deals, followed closely by the pricing gap between buyers and sellers. Based on respondent comments, market trends have been geographically distinct, with select regions posting marked improvement in leasing and sales activity.

For the full report along with respondent comments, please visit

George Ratiu, Director, Quantitative and Commercial Research

George Ratiu, Research Economist, writes regular economic columns and conducts research in the areas of commercial real estate, international investments, mortgage performance and foreclosures. He produces NAR’s Commercial Real Estate Outlook and manages quantitative surveys, including the Commercial Real Estate Quarterly Market Survey.

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