Moderate Growth forecast for US Commercial Real Estate Market

Posted on 7 March, 2014 by Jodee Redmond

The real estate market in the U.S. provides an insight into the health of that country’s economy and, according to Lawrence Yun the chief economist for the National Association of Realtors, the fundamentals are on an upward curve.


Growth is continuing at a moderate pace but from a low starting point. Consequently, despite job growth, companies are hesitant to add new space at this point.

Office demand is currently expected to see only a slow, gradual improvement, according to Mr. Yun. Demand for retail space it benefitting from an increased level of household wealth, and industrial real estate is stable due to increasing international trade.

Vacancy rates in the U.S. for office space are expected to decline by approximately 0.2 per cent, 0.1 per cent in the industrial category and 0.3 percent in the retail sector. According to the National Association of Realtors quarterly commercial real estate forecast, overall projections are as follows:

Office Markets

Vacancy rates in the office market are expected to decline from 15.8 per cent in the first three months of the year to 15.6 per cent in the first quarter of 2015. The markets with the lowest vacancy rates in Q1 are:

New York City                         9.5 per cent

Washington D.C.                 10.2 per cent

Little Rock, Ark.                    11.6 per cent

Birmingham, Ala.                 12.7 per cent

San Francisco                      12.8 per cent

Nashville, Tenn.                   12.8 per cent

Industrial Markets

Industrial vacancy rates are anticipated to fall from 9.0 per cent in Q1 to 8.9 per cent in the same period in 2015. The areas with the lowest industrial vacancy rates are

Orange County, Calif          3.7 per cent

Los Angeles                          3.8 per cent

Miami                                     5.8 per cent

Seattle                                    5.9 per cent

San Riverdale/Bernardino 6.1 per cent

Retail Markets

Retail vacancy rates are also expected to decline from 10.2 per cent in the first quarter of this year to 9.9 per cent in Q1 next year. The tightest markets in the country include

San Francisco                      3.1 per cent

Fairfield County, Conn       3.8 per cent

Long Island, N.Y.                 4.8 per cent

San Jose, Calif.                    5.2 per cent

Northern New Jersey          5.3 per cent

Orange County, Calif.         5.3 per cent

These forecasts represent a steady, rather than spectacular improvement in line with the slowly improving economy.

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