This year hasn’t been the best for the commercial real estate industry. According to a report released by the National Association of REALTORS® (NAR) on Nov. 28, NAR Chief 
Economist Lawrence Yun points out that “vacancy rates are flat” and “leasing is soft.” These factors, along with the struggling economy, have created an ideal market for winning concessions from landlords and owners.
But if you’re in the market to lease or buy commercial real estate, and you haven’t taken advantage of these conditions, the time to strike may be now. In the NAR report, Yun goes on to say “with modest economic growth and job creation, the fundamentals for commercial real estate should gradually improve in the coming year.”
He predicts vacancy rates to trend lower. When comparing the fourth quarter of this year to the fourth quarter of 2012, NAR forecasts that vacancy rates will drop across the board for the four commercial real estate sectors – by 0.6 percent in the office sector, 0.4 percent in industrial real estate, 0.8 percent in the retail sector and 0.7 percent in the multifamily rental market. Fewer vacancies would mean less supply and more favorable conditions for landlords and sellers.
In terms of rental rates, NAR is forecasting modest increases for next year. This trend could be more dramatic in the multi-family market, which already has the tightest vacancy rates of any commercial sector. Apartment rents are expected to rise at faster rates throughout most of the country, and if new multi-family construction doesn’t ramp up, “rent growth could potentially approach 7 percent over the next two years,” Yun says.
When you combine this report with the fact that unemployment is at its lowest level in 2-1/2 years, there are strong indications that real estate leverage may soon begin shifting back to the sellers’ side on a broad scale.
Many of the same trends mentioned in the NAR report are playing out in our local market of central Pennsylvania. Of course, no one truly knows where the local, national and global economy will end up next year, but the present time may very well be a better time to invest or lease commercial real estate than 12 months from now.
Want to know more about what 2012 has in store for the commercial real estate industry? Would you like information about local vacancy or unemployment rates? Contact Michael Kushner at Omni Realty Group and learn more today!