Commercial Realty’s Growth Tempered by Slowdown in Job Creation

The commercial real estate sector is growing, albeit at a slower rate. Slowdown in job creation and tight loan availability are tempering robust growth in some areas, according to the National Association of Realtors (NAR) quarterly commercial real estate forecast.

“Job creation in the second quarter was about half of what we saw in the first quarter, which is moderating demand in the office sector,” Lawrence Yun, NAR chief economist, said in a press statement. “Industrial and warehouse space is holding on better because imports and exports have advanced. While exports to Europe generally are down, trade has been robust with India, China and other Asian nations, along with Brazil, Mexico and our strongest trading partner – Canada.”

The report analyzed vacancy rates in the commercial sectors of office, retail, industrial and multi-family housing and projected how these markets are going to fare in 2013.

According to the report, vacancy rates in the office, retail, multifamily and industrial sectors are expected to drop substantially in 2013.

For instance, vacancy rate in the office sector is expected to fall from an estimated 16.1 percent in the third quarter of 2012 to 15.6 percent in the third quarter of 2013. Likewise, retail vacancy rates are expected to decline from 10.9 percent in the third quarter to 10.7 percent same time next year and that of industrial markets will drop from 10.7 percent to 10.5 next year.

Vacancy rates in the apartment rental market or the multi-family housing market are projected to drop from 4.3 percent in the third quarter to 4.2 percent in the third quarter of 2013. However, the decrease in space available is going to shoot up rentals in the range of 0.3 percent to 0.7 percent, the report showed.

But despite decreasing vacancy rates and increasing rentals in all the sectors, the report states that significant changes in the outlook are unlikely before the end of the year.

“Many corporate decisions on spending and job hiring are on hold given uncertainty over the upcoming elections, whether Congress will effectively avoid a fiscal cliff and unsettled issues such as health care and banking/financial regulations,” the report said.