Realtors group: No meaningful recovery expected in commercial real estate this year

Realtors give commercial real estate outlook

WASHINGTON — The commercial real estate market is not expected to recover this year, with vacancy rates set to rise and rents forecast to fall, the National Association of Realtors said Tuesday.

No meaningful recovery is expected to come before 2011, as concerns about unemployment, consumer confidence and other economic conditions persist, the realtors group said.

“Because of the lingering impact from the deep recession over the past two years, vacancy rates will trend higher and many commercial property owners will need to make rent concessions,” said Lawrence Yun, the group’s chief economist.

“With the job market expected to turn for the better later this year, we’ll see rising demand for office and warehouse space, but that isn’t likely before 2011,” he said.

The realtors group analyzes quarterly data and provides a forecast for four major commercial sectors — office, industrial, retail and apartment rental markets.

In the office sector, vacancy rates are forecast to rise to 17.6 percent in the fourth quarter of this year from 16.3 percent in last year’s fourth quarter. Annual office rent is projected to decline 7.2 percent this year.

For the industrial market, vacancy rates are predicted to rise to 14.9 percent in this year’s fourth quarter from 13.9 percent in last year’s fourth quarter. Annual industrial rent is likely to fall 9.6 percent this year.

In retail, vacancy rates are expected to rise slightly to 12.7 percent from 12.4 percent. Average retail rent is forecast to dip 2.4 percent this year.

In the apartment rental market, vacancy rates are likely to decline to 6.6 percent from 7.4 percent. Average rent is projected to decline 3.4 percent this year.