Steady Growth Seen in Multifamily Market

 Commercial real estate leasing patterns are showing steady but modest growth, according to the National Association of Realtors quarterly commercial real estate forecast.

Lawrence Yun, NAR chief economist, projects only modest changes in the coming year. Jobs are the key driver for commercial real estate, and the accumulation of 7 million net new jobs from the low point a few years ago is steadily showing up as demand for leasing and purchases of properties, he said. But the difficulty of accessing loans remains a hindrance to a faster recovery.

Commercial investment in properties costing more than $2.5 million rose 26 percent from a year ago, while prices for large properties were 9 percent above the third quarter of 2012.

National vacancy rates over the coming year are forecast to decline 0.2 percentage point in the office market, 0.6 point in industrial, and 0.5 point for retail real estate. The average multifamily vacancy rate will edge up 0.1 percent, but that sector continues to see the tightest availability and biggest rent increases.

NARs latest Commercial Real Estate Outlook offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS, Inc., a source of commercial real estate performance information.

Multifamily Markets
The apartment rental market ” multifamily housing ” is likely to see vacancy rates edge up 0.1 percentage point from 3.9 percent in the fourth quarter to 4.0 percent in the fourth quarter of 2014, with new construction helping to meet higher demand. As a rule, vacancy rates below 5 percent are considered a landlords market, with demand justifying higher rent.

Areas with the lowest multifamily vacancy rates currently are New Haven, Conn., at 1.9 percent; Syracuse, N.Y., 2.0 percent; Minneapolis and San Diego, at 2.1 percent each; and New York City, 2.2 percent.

Average apartment rents are forecast to rise 4.0 percent this year and 4.3 percent in 2014. Multifamily net absorption is projected to total 239,400 units in 2013 and 211,300 next year.

The Commercial Real Estate Outlook is published by the NAR Research Division. NARs Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.

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