Office market demand to improve this year

Office property development may improve.

The office market's recovery prospects may improve for commercial property managers in the next several months, as low inventory and heightened demand may encourage higher rents and further developments.

Some of the most prominent cities in the country may see a boost in their respective office markets starting this year and picking up into 2014, according to a report from Jones Lang LaSalle. This includes 34 prominent office markets spread across the country.

The vacancy rates for properties in the top 10 markets outlined by the firm already are less than 10 percent, JLL's Spring 2013 United States Skyline Review noted. This is largely because of the slow development process in these areas, as businesses filled remaining space in recent months.

Development in these cities is starting to become more prevalent, as more than 24 percent of the markets examined have a property pipeline, while another three areas have a smaller markets are nearing levels of the more successful cities, the report explained. While development may not show a significant amount of results for the time being, by next year, every one of the markets examined will have a balanced supply and demand level.

"These are the segments of the markets that always lead the rest of the office sector in trends of leasing, rent and ultimately investment growth," said John Sikaitis, senior vice president of research for Jones Lang LaSalle. "The reason behind that is that these core micro-markets are increasingly where demographics are shifting and thus where tenants most want to be, allowing supply fundamentals to be tightest, giving investors the ability to capture tenants, grow rents, shrink yield and even construct new buildings."

Apartment market may also experience improvements
While the office market is making its way back in its recovery process, the apartment market should continue to flourish, albeit at a lesser growth rate than in the past.

Major apartment destinations such as Washington, D.C., New York and Boston will still experience rent growth improvements in the coming months, though the figures will not be as significant as in the past, according to a report from CoStar Group. Despite this, some other markets, such as San Francisco, Salt Lake City and St. Louis, are expected to pick up again.

Additionally, the report noted that vacancies fell 50 basis points lower than the average of the past 10 years in 2012, while rents are more than 3 percent higher than the previous peak.

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