Service Request

Commercial Real Estate Market Continues To Improve

Submitted by D. Saperstone
Nationwide, the commercial real estate market continued it’s slow but steady improvement in the 2nd quarter of 2013. Virtually all asset classes showed improvement versus the 1st quarter of 2013 and versus the same period in 2012. Nationally, the office vacancy rate stood at 15% which reflects a slight improvement over Q1 results. However, the improvement in the office market is really market specific with considerable gains in many relatively small markets and no gain in other larger markets. In many markets, the overhang of office space generated by the recession has not been fully absorbed. But, with the increase in hiring reported by the Labor Department, there is reason to be moderately optimistic that this will evidence itself in greater office space demand, further reducing the overhang and lowering the vacancy rate.

Apartment assets remain exceptionally hot with national vacancy rates steady at about 4.5%. This very strong performance by this sector will support continued rent growth. New apartment construction continues to accelerate in most markets and will most assuredly slow rent growth as these projects come to market. However, the addition of new apartment construction will, in our opinion, merely meet the demands of the current market and will not result in a significant change to the market dynamic driving higher occupancy rates.

As consumer spending continues to escalate, so too will the absorption of the overhang in vacant retail space. The retail market has finally stabilized as evidenced by the improvement in the national vacancy rate of a little over 12%. Retail sales in existing centers have shown significant gains this year and sales momentum continues to grow.  Continued improvement in the housing sector will also benefit the retail sector as homeowners hit the stores for new furniture, carpeting, appliances and other housing related goods.

We at THE CABOT GROUP remain confident that investment grade real estate still represents an exceptional value for almost any portfolio.  Our clients weathered the economic storm of the past five years and, with our assistance, are well positioned to see continued growth in the value of their real estate investments.       

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