Commercial fundamentals improved in the fourth quarter 2014, with rising net absorption driving rents higher across the major property types. As employment gains are expected to continue into 2015, demand for commercial space is expected to advance.
Multifamily demand is expected to remain strong, as the pace of household formation closes on historical averages. However, 2015 will mark the first year since the recession that supply will likely outpace demand.
Across metropolitan areas, Lexington, KY experienced the largest year-over-year availability decline during 2014. Apartment vacancy declined 100 basis points, closing the year at 5.0 percent. The decline was driven by a significant shift in demand, coupled with zero new completions. Net absorption moved from negative 129 units in 2013 to 214 units in 2014.
Employment growth in the Lexington-Fayette MSA was positive for the year, with 2,400 net new jobs. In addition, the metropolitan area recorded 590 new households. The average household income rose 5.0 percent on a yearly basis.
Apartment asking rents in Lexington rose 1.0 percent year-over-year in 2014, to $692. Effective rents advanced 0.8 percent.
For a look at NAR’s commercial forecast for 2015, visit http://www.realtor.org/reports/commercial-real-estate-outlook.