Lately, there have been signs indicating the U.S. commercial real estate sector may have begun a slow recovery. While the recovery of this sector is expected to take a long time in Europe due to the financial crises of many of its member countries, the U.S. market is looking optimistic for various reasons.
In its recently released Commercial Real Estate Report, Credit Suisse’s Customized Funds Investments Group (CFIG) states that “while sovereign debt concerns could delay the commercial real estate sector’s recovery in Europe, The U.S. market may be less risky since the U.S. economic recovery is expected to be more pronounced and more likely to occur before most other developed economy turnarounds.”
The authors of the report say U.S. investors will be able to capitalize on the situation by “acquiring distressed property; investing in income-generating, value-added real estate such as multifamily and office properties; and concentrating on private real estate investments.” Opportunities include self-storage, medical offices, student housing and senior housing. The authors also noted that the “road to complete recovery still appears somewhat volatile.”
Furthermore, the report highlighted several critical factors that are required for a sustainable in commercial real estate. These include increase in property demand, sustained growth in U.S. economy, improved valuation of commercial properties, stabilization of bond and credit markets, resurgence of commercial mortgage-backed securities (CMBS), and significant improvements in access to credit.
According to the National Association of Realtors (NAR), the improving economy and job creation mean growing demand for commercial real estate. NAR’s forecast of vacancy rates for the second quarter of 2012 and beyond include a decline of one percent in the office sector, 0.9 percent in industrial real estate, 0.5 percent in the retail sector and 1.1 percent in the multifamily rental market.
The Society of Industrial and Office Realtors’ (SOIR) Commercial Real Estate Index, which is an attitudinal survey of more than 360 local market experts, showed a solidification of market basics. The SOIR Index which measures the impact of ten variables rose 6.8 percent to 57.5 percent in the first quarter, the highest since the fall of 2008.These numbers were generally driven by improved market conditions in the South and Northeast. Although the index is much lower than 100, which is the level representing a balanced marketplace, this is the sixth consecutive quarterly improvement after almost three years of decline. The index hasn’t reached the 100 level since the third quarter of 2007.
Vacancy rates in the office sector are expected to fall from 16.3 percent in the second quarter of 2011 to 15.3 percent in the second quarter of 2012. At slightly under 9 percent, Honolulu and New York City currently have the lowest office vacancy rates. Office rents are projected to rise 0.3 percent this year and an additional 4.3 percent in 2012.
Industrial vacancy rates are expected to go down from 13.9 percent in the second quarter to 13 percent in the second quarter of 2012. Los Angeles and Salt Lake City have the lowest industrial vacancy rates, which is in the 7-8 percent range. The annual industrial rent is expected to decline 1.5 percent in 2011 before rising 2 percent next year.
Multifamily housing (apartment rental market) vacancy should drop from 5.8 percent in the current quarter to 4.7 percent in the second quarter of 2012. With vacancies below 3 percent, Pittsburgh, San Jose and Portland, Oregon have the lowest multifamily vacancy rates as present. The average apartment rent is likely to rise 3.4 percent this year and another 4.3 percent in 2012.
Retail vacancy rates are expected to decline 13.1 percent in the second quarter of this year to 12.6 percent in the second quarter of 2012. Honolulu, Long Island, NY, and San Jose have the lowest retail vacancy rates at slightly below 9 percent. Average retail rent is expected to decline 1.4 percent in 2011, and then rise 0.7 percent next year.
In its recently released Commercial Real Estate Report, Credit Suisse’s Customized Funds Investments Group (CFIG) states that “while sovereign debt concerns could delay the commercial real estate sector’s recovery in Europe, The U.S. market may be less risky since the U.S. economic recovery is expected to be more pronounced and more likely to occur before most other developed economy turnarounds.”
The authors of the report say U.S. investors will be able to capitalize on the situation by “acquiring distressed property; investing in income-generating, value-added real estate such as multifamily and office properties; and concentrating on private real estate investments.” Opportunities include self-storage, medical offices, student housing and senior housing. The authors also noted that the “road to complete recovery still appears somewhat volatile.”
Furthermore, the report highlighted several critical factors that are required for a sustainable in commercial real estate. These include increase in property demand, sustained growth in U.S. economy, improved valuation of commercial properties, stabilization of bond and credit markets, resurgence of commercial mortgage-backed securities (CMBS), and significant improvements in access to credit.
According to the National Association of Realtors (NAR), the improving economy and job creation mean growing demand for commercial real estate. NAR’s forecast of vacancy rates for the second quarter of 2012 and beyond include a decline of one percent in the office sector, 0.9 percent in industrial real estate, 0.5 percent in the retail sector and 1.1 percent in the multifamily rental market.
The Society of Industrial and Office Realtors’ (SOIR) Commercial Real Estate Index, which is an attitudinal survey of more than 360 local market experts, showed a solidification of market basics. The SOIR Index which measures the impact of ten variables rose 6.8 percent to 57.5 percent in the first quarter, the highest since the fall of 2008.These numbers were generally driven by improved market conditions in the South and Northeast. Although the index is much lower than 100, which is the level representing a balanced marketplace, this is the sixth consecutive quarterly improvement after almost three years of decline. The index hasn’t reached the 100 level since the third quarter of 2007.
Vacancy rates in the office sector are expected to fall from 16.3 percent in the second quarter of 2011 to 15.3 percent in the second quarter of 2012. At slightly under 9 percent, Honolulu and New York City currently have the lowest office vacancy rates. Office rents are projected to rise 0.3 percent this year and an additional 4.3 percent in 2012.
Industrial vacancy rates are expected to go down from 13.9 percent in the second quarter to 13 percent in the second quarter of 2012. Los Angeles and Salt Lake City have the lowest industrial vacancy rates, which is in the 7-8 percent range. The annual industrial rent is expected to decline 1.5 percent in 2011 before rising 2 percent next year.
Multifamily housing (apartment rental market) vacancy should drop from 5.8 percent in the current quarter to 4.7 percent in the second quarter of 2012. With vacancies below 3 percent, Pittsburgh, San Jose and Portland, Oregon have the lowest multifamily vacancy rates as present. The average apartment rent is likely to rise 3.4 percent this year and another 4.3 percent in 2012.
Retail vacancy rates are expected to decline 13.1 percent in the second quarter of this year to 12.6 percent in the second quarter of 2012. Honolulu, Long Island, NY, and San Jose have the lowest retail vacancy rates at slightly below 9 percent. Average retail rent is expected to decline 1.4 percent in 2011, and then rise 0.7 percent next year.
