Realtors moderate growth projections for us commercial property

Commercial real estate vacancy rates in the United States are flat and projections for growth have been moderated because economic growth and job creation have been weaker than expected, but modest improvements are expected over the coming year, according to the National Association of Realtors.

NAR chief economist, Lawrence Yun, said the weakening economy will slow the growth in demand for space. ‘Disappointing economic growth in recent months means a slower recovery for most of the commercial real estate sectors, although multifamily housing continues to benefit from pent up demand resulting from an abnormal slowdown in household formation in recent years,’ he said.

‘Many young people, who normally would have struck out on their own from 2008 to 2010, had been doubling up with roommates or moving back into their parents’ homes. However, they’ve been entering the rental market as new households in stronger numbers this year. As a result, apartment vacancy rates are declining and rents are rising at faster rates,’ he added.

He added that a ‘healthy’ recovery is already occurring in the multifamily sector, with average apartment rent expected to rise 2.5% this year and another 3.2% in 2012. ‘Normally, rising rents correspond to rising home prices. However, this isn’t happening in this recovery because buyers are constrained by unnecessarily restrictive mortgage underwriting standards, so the underlying demand isn’t drawing inventory down quickly enough to support price growth,’ he said.

Source: PropertyWire.com