Despite mixed outlook, commercial real estate companies expect improvements in the office sector

As fundamentals improve, the office sector is expected to make consistent gains.

While a panel of commercial property managers discussed Connecticut's future, national vacancy rates fell revealing an optimistic turn for commercial real estate.

The Norwalk Citizen reported more than 250 attended a six-member commercial real estate panel at the Stamford Hilton to discuss the recent movements in the commercial marketplace. Currently, vacancy rates in Connecticut are pushing 20 percent – a challenge for any commercial enterprise. And with many tenants demanding modern amenities and the implementation of green technologies, real estate professionals are assessing their priorities.

Brett Wilderman, principal of Forestone Capital, stated that, in order to accommodate his tenants, he has reached out to the Commercial Property Assessed Clean Energy (C-Pace) government loan program to finance such building enhancements. 

"It's not a fad," said Alex Argento, owner of Vidaris, a company that provides building efficiency services. "It's here to stay. Our clients understand the need to be forward thinking. In this market, we've seen a lot of repositioning with small changes to differentiate yourself from your next door neighbor."

Still, others on the panel argued that, despite the challenges presented by efficient retrofits and constrained occupancy levels, improvements are on their way given economic activity. 

"We're optimistic," added Wilderman. "Maybe that's because we've been active in the marketplace. We're bullish for the next three or four years as market dynamics unfold."

The office sector
The National Real Estate Investor reported a recent decrease in nationwide office vacancy rates, dipping down to 15.3 percent according to Cassidy Turley and CBRE reports. Coupled with jobs and payroll gains, the office sector is poised for significant growth.

"I think for the next six months you're going to see office employment gains reach pre-recession peak figures, setting the stage for stronger and more consistent market moves by January," said Art Jones, senior managing economist at CBRE Econometric Advisors. "That's not in just the high tech and the energy markets, which continue to lead the nation, but as the housing markets improve you're going to see the office market hit its stride, with likely 4 percent to 5 percent rent growth in 2014."

Absorption levels have already improved. While only 5 million square feet was absorbed during the first quarter, almost three times as much was absorbed in the second quarter, topping off at 15.1 million square feet according to Cassidy Turley data. Many analysts believe this is the result of increased demand for office space and the tightness of new supply with vacancy improvement expected through 2014, NREI reported.

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