The recovery in commercial REALTOR® markets notched a noticeable gain during the first quarter 2013, as sales and leasing activity advanced. Based on the results of the May Commercial Real Estate Market Survey, commercial practitioners reported a solid start to the year. REALTORS® rated the direction of commercial business opportunities 4.0 percent higher from the fourth quarter 2012, in the wake of a 6.0 percent rise from the third quarter of last year.
Economic activity maintained grew at a steady pace during the first quarter of the year, as consumers and businesses focused on the year ahead. Gross domestic product rose 2.4 percent in the first quarter, as consumers opened up their wallets at the fastest pace since the fourth quarter 2010. Consumer spending increased 3.4 percent in the first quarter, lifted by a 9.1 rise in auto purchases, coupled with an equal advance in sales of recreational goods and vehicles.
With aging vehicles and with manufacturers rolling out technologically advanced and more fuel efficient new models, consumers are finding new cars attractive. Sales of cars in April totaled 651,644 units, a 3.1 percent increase year-over-year. Sales of light-duty trucks, which include SUVs, advanced 14.7 percent, benefiting from the soaring popularity of car-based cross-over vehicles, which recorded the strongest yearly gain in April, at 16.5 percent. Pick-up trucks also recorded solid sales growth, with the Ford F-Series leading the sales charts, followed by the Chevrolet Silverado.
Economic activity posted a steady pace of growth over the past few months, as consumers and businesses seemed committed to moving forward. Gross domestic product rose 2.4 percent in the first quarter of the year. Riding the moderate temperature of a mild winter, consumers opened up their wallets at the fastest pace since the fourth quarter 2010.
The economy closed 2012 with positive growth, the slow fourth quarter GDP data notwithstanding. Mirroring that growth, commercial real estate also notched a year of growth and expansion. Fundamentals continued improving through the fourth quarter of the year, with declining vacancies and rising rents. The apartment sector shone brightly, and office and industrial spaces also found favorable conditions. With a strengthening foundation, investment sales found a higher ledge on their climb from the depths of the 2008-09 Great Recession.
With employment in office-centered industries rising, demand for office buildings advanced. For office properties, net absorption totaled 17.4 million square feet in 2012, according to Reis, Inc. The supply of new office space ramped up, but did not match demand—there were about 12.0 million square feet of new completions. Vacancy rates for office properties are expected to hit 16.0 percent by the end of the first quarter of 2013 and to continue declining to an average 15.9 percent for the year. The decline in vacancies is expected to be accompanied by a 2.6 percent rise in rents.
For more information about the 2013 commercial real estate outlook, see the Expectations & Market Realities in Real Estate 2013 report.
Approximately three to four percent of REALTORS® report a commercial rental every month. On an annual basis, this would be in the neighborhood of 175,000 rental transactions per year. In addition, approximately three percent of REALTORS® report a commercial sale.
According to the Commercial Real Estate Quarterly Market Survey, rental volumes are up by three percent on a quarter-over-quarter basis. Rental rates are down by two percent, although the level of downward pressure has been decreasing. For sales, volume is up by 11 percent, with prices down 3%.