Q2 Demand as Weak as Expected Across Sectors–Except Multifamily

By: Barbra Murray, Contributing EditorThe dismal economy continued its stranglehold on the commercial real estate industry, as per CBRE Econometric Advisors’ recently released analysis, pushing up vacancies in the office, industrial and retail property markets. But there was one surprise. Demand in the multi-family sector, despite the ongoing job losses that are hindering the formation of new households, was essentially unchanged from the first quarter of the year. Neither the central business district nor the suburban office markets were able to put a lid on the growing stock of available space. Suffering an increase of 80 basis points, the office vacancy across the country rose to an average 15.5 percent. The numbers were most dire outside the CBD. The rate jumped 70 points in downtown markets and 90 basis points in the suburbs for an average vacancy rate of 11.7 percent and a whopping 17.6 percent, respectively. But things certainly could be–and have been–worse, as the office market’s average vacancy rate is still quite far from the high of 19.1 percent reached in 1991. The news is no less grim for the industrial market, which experienced an 80 basis points increase that brought the vacancy rate up to 13 percent, the highest figure for the sector in the last six years. Numbers escalated in the retail sector, but the increase was less severe than seen in office and industrial. With an increase of 50 basis points, the average vacancy rate for the retail market hit 12 percent. The good news is the rate of growth slowed down from the first quarter when there was a jump of 80 basis points from the fourth quarter of 2008. Skyrocketing vacancies across the board were widely anticipated, however, the industry did not expect the unexpected, which occurred in the multifamily sector. With a second quarter vacancy rate of 7.3 percent, demand for apartments held steady from the first quarter, according to the report, in spite of the consistently weak employment and housing markets and additional multifamily communities having come online. A turnaround is not necessarily on the horizon, as despite the ray of sunshine, the report concludes that vacancies are still trending up.–Nielsen Business Media