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Real Estate Journal
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M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher, Conference Producer . .............Linda Christman AVP, Conference Producer ...........................Lea Christman Associate Publisher ......................................... Steve Kelley Associate Publisher ........................................... Kim Brunet Senior Editor/Graphic Artist ..........................Karen Vachon Office Manager ............................................. Miriam Buttrick Contributing Columnists . George Crawford, Glenn Ebersole, Postmaster send address change to: Mid Atlantic Real Estate Journal 350 Lincoln St, Suite 1105, Hingham, MA 02043 USPS #22-358 | Vol. 29 Issue 18 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Phone: 781-740-2900 | Fax: 781-740-2929 www.marejournal.com Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices
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Lawrence Yun
Ou t l o o k Rema i n s Bright for Commercial Real Estate Despite Price Plateau W ASHINGTON , DC — Commercial real estate price growth in large markets is expected to flatten over the next year, but strong leasing demand and in- vestor appetite in smaller mar- kets should keep the sector on solid ground, according to the latest National Association of Realtors quarterly com- mercial real estate forecast. Backed by the ongoing stretch of outstanding job creation in recent years, na- tional office vacancy rates are forecast by Realtors to retreat 1.1% to 11.9% over the com- ing year. The vacancy rate for industrial space is expected to decline 1.1% to 7.8%, and re- tail availability is to decrease 0.4% to 11.4%. Even as new apartment completions bring more supply to many markets, the multifamily sector will still likely see a vacancy rate decline from 6.6% to 6.1%. Lawrence Yun, NAR chief economist, says the U.S. econ- omy is on stable footing and is chugging along at a decent but unspectacular pace. “A very healthy labor market and stronger confidence and spending from both consum-
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The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
ers and businesses boosted economic expansion to a solid 3.0% last quarter,” he said. “There’s legs for more of the same growth to close out the year, which bodes well for sustained interest in all types of commercial space.” According to Yun, the appe- tite for commercial property is high, but investment activity does appear to be entering the maturation phase of the current cycle. The investor shift away from large markets to smaller ones is creating a divergence in sales activity. In the second quarter, large markets saw a 5% annual de- cline in sales, while Realtors reported a sales boost of 4% in small markets. “While inventory shortages are still driving prices higher inmost markets, shrinking cap rates and the higher interest
rate environment are expected to lead to a plateau in price growth over the next year, especially for class A assets in large markets,” said Yun. “As a result, investors will continue to look to small and tertiary markets for properties that have the best opportunity to provide stability and generate solid returns.” Led by the industrial and multifamily sectors, Real- tors continue to report that leasing fundamentals for the four major commercial sec- tors are strong. Last quarter, the considerable appetite for industrial space – primarily from ecommerce and trade – resulted in distribution ware- houses and logistic centers driving close to 70% of new construction leasing. Although 225.4 million s/f of additional continued on page A
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