After several years of slow-moving growth the commercial real estate market is in a recovery mode as transaction volume increased 27 percent over a year ago and prices display solid gains, said National Association of Realtors® Chief Economist Lawrence Yun during a commercial real estate forum at the 2013 REALTORS® Conference & Expo in San Francisco today.
While the overall commercial sector appears to be improving, Yun said this isn’t the case in all parts of the market. “Realtors® involved in commercial real estate have reported they’re still seeing little improvement,” said Yun. “Commercial members typically handle smaller transactions, properties under $1 million; this part of the market is moving incrementally. At the opposite end, expensive properties priced above $2 million are doing much better. What we’re seeing is two very distinct markets within the commercial sector.”
Yun said the apartment sector continues to perform better than other sectors in commercial real estate. Prices are increasing and vacancy rates are decreasing. He predicts the rental population will continue to rise over the next five years because of an increase in household formation. Areas of the country where apartment vacancy rates are especially low are New York City and San Diego; cities where vacancy rates remain high are Houston and Memphis, Tenn.
Office vacancy rates are also decreasing, and rents have recently turned the corner and are positive. Yun pointed out that while companies are hiring more people, office space is not increasing. He said this might be due to employees sharing office space; however, Yun predicts this trend can’t continue. As hiring increases, net absorption will increase as well. The markets with the lowest office vacancy rates are Washington, D.C. and … Read more here…