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The U.S. commercial real estate (CRE) market continued to look better in the first quarter of 2013, according to ""CBRE Group, Inc."":http://www.cbre.com/EN/Pages/Home.aspx
[IMAGE]The latest analysis from the CRE services and investment firm shows vacancy levels dropping or remaining level across all commercial sectors as demand continues to rise.
""Retail locations and warehouse buildings had their best quarter in terms of vacancy/availability declines in several years as a result of a more confident consumer. Higher spending on consumer goods led to improved occupancy in both property types,"" said Jon Southard, managing director of CBRE's Econometrics Advisors group. ""Recovery also remained on track in multifamily and office, although demand did not dramatically outpace new supply during the quarter in either of these sectors.""
The office vacancy rate fell 10 basis points to 15.3 percent, 70 basis points below last year's first-quarter rate. Suburban markets continued to outpace downtown markets in the first three months of 2013, with the suburban vacancy rate falling 10 basis points to 17 percent and the downtown rate remaining flat at 12.4 percent.
Office vacancies have fallen for 11 consecutive quarters now, CBRE Group reported.
Local market performance was more mixed, with vacancy declining in 31 of the 63 markets tracked. The best performers last quarter were smaller markets, including Austin and Las Vegas (with vacancy rate declines of 120 basis points each). Most ""gateway"" markets (including Boston, Chicago, Los Angeles, New York, and San Francisco), meanwhile, struggled.
""Private-sector hiring has been solid, as companies have largely shrugged off government spending cuts,"" Southard said. ""However, due to the sequester we expect further [COLUMN_BREAK]
cutbacks in federal and state spending in the coming quarters. These cuts will likely only slow total employment growth--not stop it. As a result, office occupancy should continue to improve for the remainder of 2013, albeit at a slower pace than last year.""
Vacancy in the industrial market had an availability rate of 12.3 percent in Q1, down 230 basis points from its recessionary peak. According to CBRE Group, the recovery is broadly based, with 48 markets posting declines, seven showing increases, and five unchanged quarter-over-quarter.
The recovering auto industry provided a large boost to certain manufacturing markets and led the industrial recovery in Q1. In total, availability fell 100 basis points or more in 10 markets, including Boston, Chicago, Raleigh, and Trenton.
In the retail sector, the availability rate was 12.5 percent in the first quarter, a decline of 30 basis points from Q3 (the largest drop since 2005).
Notably strong performers included Richmond, Charlotte, Cleveland, Memphis, and Phoenix. Each recorded a decline of 60 basis points or more. At the other end, Tampa, Fort Lauderdale, and Birmingham saw availability increase, largely as a result of the housing crisis driving retail growth to better-performing markets.
The apartment market saw vacancy standing flat at 5.1 percent. Despite slow growth in demand, the market remains tight by historical standards, with the four-quarter trailing average rate remaining at 4.9 percent (40 basis points below the long-term norm).
Compared to last year, vacancy declined in 23 of the 63 markets monitored, including Orlando, Atlanta, Cleveland, Albuquerque, and Cincinnati.
With occupancy staying slightly below the historical norm, CBRE Group expects effective rent growth will remain healthy this year as the economy continues to recover.
""With effective rents now well above their pre-recession levels in most major markets, new apartment construction picked up in recent months and completions are bound to return to historical norms towards the year's end. This will temper rent growth, slow the pace of declines in vacancy and in many markets, will contribute to rising vacancy rates in the near term,"" CBRE Group said in a release.
