Commercial market shows signs of recovery

The commercial real estate market's recovery progress is improving.

The commercial real estate market showed improvement nationwide in the past several months, and recovery should pick up through next year.

Property management companies may benefit from the continued market gains, as vacancy rates will likely continue to drop, while rental rates will pick up, according to a report from the National Association of Realtors. Specifically, the Commercial Real Estate Outlook projects that vacancy rates will drop for all four sectors of the market.

The multifamily sector will have a drop of 0.1 percentage point in the next year, which will bring the figure to 3.9 percent in the next year, the report explained. The office market will drop a full percentage point to 15.7 percent in the next 12 months. The retail sector will see a drop of 0.2 percentage point, from 10.8 percent during the fourth quarter of this year, to 10.6 percent during the fourth quarter of next year. In the industrial sector, the vacancy rate should fall to 9.5 percent in the final three months of 2013 from the fourth quarter of this year's level of 10.1 percent.

"Job creation is the key to increasing demand in the commercial real estate sectors," said Lawrence Yun, chief economist for NAR. "The economy is expected to grow 2.5 percent next year, and with modest job creation, assuming there is no fiscal cliff, the demand for commercial space will gradually rise. The greatest friction that remains is a tight credit environment, notably for smaller properties."

Rental price levels should jump
The industrial rent level will likely jump 1.7 percent this year, as well as an additional 2.2 percent next year, according to the report. Office rent levels should rise 2 percent and 2.5 percent in 2012 and 2013, respectively. Multifamily rent figures should jump more than 4 percent both this year and next year, while retail rents will rise nearly 1 percent through the remainder of the year, as well as 1.4 percent in 2013.

Multifamily rent levels outpaced residential price increases in September, according to a report from Trulia. The month experienced a rent increase of 5.1 percent from 12 months earlier, which was far higher than the 2.9 percent recorded for residential properties during the same period.

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