December 21, 2015
Third-quarter numbers from Reis offer interesting contrasts between commercial real estate products. The apartment sector is still on fire, as demand remains robust. Then there is retail, which is, at best, mixed. Read further to see what the Reis analysts are saying.
Apartment Market Strong, But . . .
Asking Rent: Quarterly, 1.4%; Annual, 4.2%
Effective Rent: Quarterly, 1.5%; Annual, 4.3%
Reis notes that year-over-year apartment rent growth hasn’t been this strong since 2007. However, the more than 40,000 units delivered in 3Q15, combined with a forecasted 100,000-unit delivery in 4Q, could create a vacancy increase and slight downward pressure on rents.
Office: Steady Improvement
Asking Rent: Quarterly,0.6%
Effective Rent: Quarterly, 0.7%; Annual, 3.5%
Reis analysts indicate the sector is on track for a 30-bps decline in vacancies in 2015, the strongest showing since 2012. Absorption and construction are also keeping pace with demand. Office sector improvement has been gradual, and Reis believes the market should improve nicely over the next five years.
Industrial: Steady Numbers
Flex/R&D — Vacancy: 12.1%; Quarterly Effective Rent: 0.4%
Warehouse/Distribution — Vacancy: 12.1%; Quarterly Effective Rent: 0.4%
Industrial fared better than retail in 3Q, with vacancies falling and rent growth notching up. But some warehouse/distribution developers have cancelled or placed hold on projects, due to uncertainties over the economy.
Retail: Mixed Bag
Neighborhood/Community Centers — Vacancy: 10.1%; Quarterly Asking & Effective Rents: 0.5%
Regional/Large Malls — Vacancy: 7.9%; Quarterly Asking Rent: 0.5%
Reis contends that a “relative lack of demand” is leading to sluggish growth among community shopping centers. High-end regional malls are doing well, but not their lower-end counterparts. And while consumer spending is up (thanks to cheap oil), e-commerce continues to lower demand for brick and mortar stores.