Commercial Realty Recovering
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According to the US real estate industry, the commercial real estate market is on the path to recovery. A modest rise in rent has been forecast for the national market in 2011. In 2012, the job market is expected to improve and the real estate market will pick up pace.
Reis, a research company, reported that in the first quarter Washington had the lowest office vacancy rate at 9.2 per cent, followed by New York at 10.7 per cent. On the other hand, Detroit and Phoenix had the highest vacancies at 26.6 per cent. Nationally, vacancies increased from 17.3 per cent a year earlier.
In the first three months of this year, commercial buildings gained a net 4.7 million square feet of occupied space, the second consecutive increase following 11 straight quarters of declines, Reis reported.
In the first quarter, demand for rents by landlords increased to an average $27.66 per square foot from $27.53 in the previous three months and $27.57 a year earlier, Reis said. Effective rents (actual rents paid by tenants) rose to $22.20 per square foot from $22.09 in the fourth quarter. This, analysts say, shows buoyed confidence levels of landlords. Another sign of landlords’ optimism has been borne out by the fact that effective rents stay in 45 out of 75 markets in the last quarter, which is up from 39 in the previous three months.
According to a survey conducted by PricewaterhouseCoopers, investors are showing more confidence about buying commercial property. The report further said signs of recovery are boosting optimism among owners and buyers during 2011. But it pointed out that the pace at which the US economy is improving has been slow and uneven.
The report observed that major demand drivers for the US commercial real estate have reached bottom. The underlying demand for commercial real estate has begun its turnaround. But we will not see substantial price appreciation as long as the slack in supply continues, the report pointed out.
