Economists' Outlook

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REALTOR® Commercial Sales Rise 11 Percent in First Quarter

Despite disappointing economic performance and severe winter weather in parts of the country, commercial REALTORS® reported broad-based market improvements in the first quarter 2014. In keeping with the upward momentum in the markets, REALTORS® rated the direction of commercial business opportunities 6.0 percent higher in the first quarter 2014, an improvement over the 5.0 percent rise from the fourth quarter 2013.

On a year-over-year basis, sales increased 11 percent in the first quarter, as prices rose 4 percent. Cap rates continued compressing with a 50 basis point decline, from an average of 8.7 percent in the fourth quarter 2013 to 8.2 percent in the first of this year. Multifamily properties recorded the lowest average cap rates, at 7.7 percent, followed by hotels, at 7.6 percent. Office and retail spaces posted identical cap rates of 8.0 percent, while industrial properties recorded capitalization rates of 8.1 percent.


The average transaction price moved from $1.2 million in the fourth quarter 2013 to $1.4 million in the first quarter 2014. In a noticeable change, commercial REALTORS® reported that the most significant concern during the first quarter was a shortage of available inventory. The second major concern was the pricing gap between buyers and sellers. After several years of topping the list of concerns, financing dropped to a distant third place, signaling a marked shift in market conditions over the past six months.


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