Market forecast

Multifamily Still Rules

Multifamily and industrial top Real Estate Research Corp.’s outlook for the major property types for the rest of 2011.

  • The apartment market will continue to present low risk compared to the other property types, given its strong fundamentals and the nation’s demographic needs. However, some properties are considered overpriced. In addition, continued high unemployment levels and increases in rental rates, coupled with low home prices and interest rates, will keep renter demand in check.
  • The industrial sector should remain generally steady, as rents are up and absorption is increasing. The increases are expected to continue in 2011, and become more robust in 2012. With rising fuel costs, logistics companies and shippers could move toward smaller distribution centers to maximize fuel-efficient rail and to minimize trucking costs.
  • Although retail sales are likely to increase throughout 2011 and 2012 due to pent-up demand by consumers, the retail property sector will remain risky, especially with consumers directing more of their income to gas and food. The retail sector is overbuilt, and vacancy will remain high throughout 2011 with asking rents declining.
  • Fundamentals in the hotel sector were slated to improve, but the sector remains risky because of its dependence on recreational travel (as well as business travel), and with high fuel prices and increasing restaurant prices, many consumers are already cutting back on summer vacations and other travel plans for the year.
  • The office sector is likely to remain risky, with the fundamentals generally weak. However, new space completions are at a minimum, and vacancy and asking rents are starting to improve.

To learn more about what’s ahead for commercial real estate, read Ken Riggs’ complete Midyear Market Update in the July/August issue of CIRE. Also find more detailed discussion of current commercial real estate trends in the latest issue of the RERC/CCIM Investment Trends Quarterly.

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