Commercial Real Estate Sectors Remain Stable in 3Q11

Commercial real estate fundamentals improved or stayed the same for major property sectors in 3Q11, according to the latest analysis from CB Richard Ellis Econometric Advisors.

“While only the multifamily sector saw significant strengthening this quarter, net absorption remained positive in all sectors,” said Jon Southard, director of forecasting for CBRE-EA. “Though there is clearly concern about the pace of economic growth, the 3Q11 commercial real estate results have remained in line with the modest pace of recent previous quarters.”

Office Market

The office vacancy rate leveled off at 16.2 percent in 3Q11 after four consecutive quarters of improvement. Vacancy rates for downtown and suburban submarkets held steady at 13.0 percent and 18.0 percent respectively. The national office vacancy rate reflects the broader economy with slow improvements despite financial market jitters and European debt market concerns, according to the report.

Industrial Market

Overall industrial availability dropped for the fourth consecutive quarter with the recovery driving down availability in 40 industrial markets. Six markets remained unchanged and 14 markets reported increases.

Retail Market

Retail availability remained unchanged in 3Q11 despite continued increases in consumer spending. Retailers remain cautious and the retail recovery may continue at an uneven pace in the months ahead, according to the report.

Multifamily Market

In 3Q11, apartment vacancy fell to mid-2008 levels — just 30 basis points above the historical norm. Compared to 3Q10, vacancy rates declined in 53 of 60 markets tracked. Given the steady demand increases, effective rent growth continues to gain momentum and the national index is now rising at an annualized rate above 4.0 percent.