Commercial Real Estate Forecast 2015

National office vacancy rates are forecast to slightly decrease 0.1% over the coming year as the demand for office space slowly improves according to the National Association of Realtors® (NAR) quarterly commercial real estate forecast. The vacancy rate for industrial space is expected to decline 0.3% and retail space 0.4% as manufacturing output increases and low gas prices and slight income gains boost consumer spending. An influx in new apartment construction is forecast to cause an uptick (0.1%) in the multifamily vacancy rate.

Lawrence Yun NAR chief economist says commercial rents have risen at a moderate pace across the board for several quarters now and vacancy rates have been on a gradual decline. “The commercial real estate sector is on the path to recovery but subpar economic growth lack of financing available to small investors and the industry trend towards squeezing more employees into existing spaces will keep demand from meaningful acceleration” he said. “The exception is multifamily housing which remains the best performer with vacancy rates under 4% in several markets in the Northeast and in California.”

Looking ahead Yun expects the economy to slowly pick up in upcoming quarters after severe winter weather a widening trade gap and port disputes on the West Coast dragged on gross domestic product growth in the first quarter. “Similar to last year economic growth will likely rebound as the year progresses although perhaps not as robustly as what was seen in 2014. However as long as jobs are being added at a respectable pace gradual increases in demand for commercial spaces and leasing projects should continue.”

NAR’s 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 is provided by REIS Inc.

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