Commercial Real Estate on Track for Moderate 2014 Growth

Commercial real estate (CRE) patterns are expected to continue on a ""steady but modest"" growth path, the ""National Association of Realtors"":http://www.realtor.org/ (NAR) predicted Friday in its ""quarterly CRE forecast"":http://www.realtor.org/news-releases/2013/11/modest-growth-seen-in-commercial-real-estate-markets.

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NAR's recent CRE Quarterly Market Survey shows leasing activity up 2 percent in the third quarter compared to the second, with sales levels also rising. The association attributes the improvement to an economic pickup in Q3.

""Jobs are the key driver for commercial real estate, and the accumulation of 7 million net new jobs from the row point a few years ago is steadily showing up as demand for [COLUMN_BREAK]

leasing and purchases of properties,"" said NAR chief economist Lawrence Yun.

However, Yun said, ""the difficulty of accessing loans remains a hindrance to a faster recovery.""

Analyzing the CRE market's growth, NAR noted increased interest in more expensive properties. Sales of commercial properties costing more than $2.5 million rose 26 percent in the third quarter compared to last year, while sales for properties costing less than that were up 11 percent.

Over the next year, NAR expects to see vacancy rates fall in three out of four commercial sectors, edging up only slightly in the multifamily segment (up 0.1 percentage point to 4.0 percent). NAR forecasts vacancy rates of 15.4 percent (from 15.6 percent) in office markets, 8.6 percent (from 9.2 percent) in industrial markets, and 9.9 percent (from 10.4 percent) in retail markets.

As far as rents go, the association projects gains all around. In the office space, rents are expected to increase 2.4 percent in 2013 and 2.5 percent in 2014; in the industrial sector, rents are projected to rise 2.3 percent this year and 2.5 percent next year; retail markets are expected to see average rents up 1.4 percent this year and 2.2 percent year; and apartment rents are forecast to increase 4.0 percent for 2013 followed by 4.3 percent growth in 2014.