With lackluster employment growth, third quarter fundamentals in REALTOR® commercial markets maintained a positive trajectory. However, the specter of government shutdown and the budget debate added headwinds to the market performance. The results of the October Commercial Real Estate Market Survey indicated modestly rising absorption and new construction, accompanied by changing vacancies.
Leasing activity increased 2.0 percent higher over the previous quarter. On the supply side, new construction maintained momentum, increasing 5.0 percent over the second quarter. Vacancies declined for industrial and hotel properties. Office vacancies inched up 9 basis points, to 17.8 percent, while retail availability rose 110 basis points, to 15.7 percent. Multifamily vacancy reached 7.3 percent, as new supply entered the market and the residential rental market added competition.
With sliding vacancies, landlords found fewer reasons to offer rent concessions. In addition, rental rates rose 2.0 percent during the second quarter. In terms of space requirements, tenant demand remained strongest in the 5,000 square feet and below, accounting for 70.0 percent of leased properties. Lease terms remained steady, with 36-month and 60-month leases capturing the bulk of the market.
For the full report along with respondent comments, please visit http://www.realtor.org/reports/commercial-real-estate-market-survey.
Demand for rental units appears to remain strong based on rental price trends according to information from the July REALTORS® Confidence Index. Approximately 54 percent of REALTORS® conducting rentals reported higher residential rents compared to 12 months ago. About 22 percent of REALTORS® reported conducting an apartment rental.
What Does This Mean for REALTORS®? Depending on the property there may be significant financial advantages to buying rather than renting—particularly in the long run. In addition, there are major social benefits associated with home ownership with major, favorable impacts on families: Social Benefits of Homeownership and Stable Housing.
Based on early estimates, economic activity closed 2012 on a mixed note. Though gross domestic product grew at 2.2 percent for the whole year, the fourth quarter results were disappointing, showing a 0.1 percent decline. A large 22.2 percent cut in defense spending at the federal level (coming after a surprisingly high defense spending growth in the prior quarter) and a large negative change in private business inventories were key reasons for the mild contraction in the economy.
Commercial REALTOR® markets posted accelerating growth in sales and leasing activity during the fourth quarter of 2012. Based on the results of the January Commercial Real Estate Market Survey, commercial practitioners closed the year on a more upbeat note. Commercial REALTORS® rated business opportunities in the fourth quarter 6.0 percent higher than the previous quarter.