Falling Vacancy Rates and Rising Rents forecast for US Market

Posted on 18 December, 2014 by Jodee Redmond

The upturn in the US economy should keep interest in commercial real estate steady, according to the quarterly forecast released by the National Association of Realtors®.

Washington DC - Skyscrapers in Rosslyn

(NAR) Lawrence Yun, NAR’s chief economist, commented recently that commercial activity should increase gradually heading into the New Year.

He went on say that solid growth in the third quarter indicated that the second quarter results were more than an “anomaly.”

Yun observed that as business spending increased, commercial construction followed suit and the labor market improved. He said that job growth was the “catalyst to improved demand for commercial real estate leasing and new construction projects.”

Office Markets

Across the US, office vacancy rates are expected to decrease by 0.5 per cent due to the rate of job growth exceeding new inventory coming available.

The markets with the lowest vacancy rates in the fourth quarter are:

Washington D.C.                 9.3%

New York City                       9.6%

Little Rock, AR                      11.6%

San Francisco                      12.2%

Seattle                                    12.8%

Office rents are projected to increase 3.3 per cent in 2015. Net absorption (leasing of new space coming onto the market and space in existing properties) will probably total 35.6 million sq ft in 2014 and 48.8 million sq ft next year.

Retail Markets

The vacancy rates in US retail markets are expected to drop from their current level of 9.7 per cent to 9.5 per cent in the fourth quarter of 2015.

Markets with the lowest vacancy rates include the following:

San Francisco:                     3.5%

Fairfield County, Conn.      3.9 %

San Jose, Calif.                    4.6%

Orange County, Calif.         5.2%

Long Island, NY                   5.3%

Average retail rents are forecast to increase by a rate of 2.0 per cent this year, and 2.5 per cent in 2015. Net absorption of retail space is expected to hit 11.4 million sq ft in 2014 and leap to 18.9 million sq ft in 2015.

It is also expected that higher manufacturing activity will lead to lower vacancy rates for industrial space ( a 0.4 per cent fall).




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