Economists' Outlook

Housing stats and analysis from NAR's research experts.

REALTOR® Commercial Fundamentals Impacted by Slow Employment in Third Quarter

With lackluster employment growth, third quarter fundamentals in REALTOR® commercial markets maintained a positive trajectory. However, the specter of government shutdown and the budget debate added headwinds to the market performance. The results of the October Commercial Real Estate Market Survey indicated modestly rising absorption and new construction, accompanied by changing vacancies.

Leasing activity increased 2.0 percent higher over the previous quarter. On the supply side, new construction maintained momentum, increasing 5.0 percent over the second quarter. Vacancies declined for industrial and hotel properties. Office vacancies inched up 9 basis points, to 17.8 percent, while retail availability rose 110 basis points, to 15.7 percent. Multifamily vacancy reached 7.3 percent, as new supply entered the market and the residential rental market added competition.

With slower leasing growth, rent concessions registered a bump, leading to a slower increase in rental rates, up 1.0 percent during the third quarter. In terms of space requirements, tenant demand remained strongest in the 5,000 square feet and below, accounting for 88.0 percent of leased properties. Demand for space under 2,500 feet increased noticeably, driving one out of four lease agreements. Lease terms remained steady, with 36-month and 60-month leases capturing over half of the market.

For the full report along with respondent comments, please visit http://www.realtor.org/reports/commercial-real-estate-market-survey.

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