Economists' Outlook

Housing stats and analysis from NAR's research experts.

REALTORS®’ Commercial Markets Gain Steam in Fourth Quarter 2012

Commercial REALTOR® markets posted accelerating growth in sales and leasing activity during the fourth quarter of 2012. Based on the results of the January Commercial Real Estate Market Survey, commercial practitioners closed the year on a more upbeat note. Commercial REALTORS® rated business opportunities in the fourth quarter 6.0 percent higher than the previous quarter.

On the leasing side, activity rose three percent over the previous quarter, indicating rising demand. On the supply side, new construction was down only one percent from the third quarter. Vacancies declined for all property types, except hotels, which rose to 20.8 percent. Industrial rates declined 240 basis points, to 15.7 percent while retail rates decreased 130 basis points, to 16.1 percent. Availability for multifamily properties continued on a downward path, with vacancies at 7.3 percent in the fourth quarter. After a midyear bump, office availability rates slid from 19.3 percent in the third quarter to 18.2 percent in the fourth quarter.

With declining availability, landlords were in a position to offer fewer rent concessions. However, rental rates have yet to recover in most REALTOR® markets. In terms of space size, tenant demand was strongest in the 5,000 square feet and below properties. The fourth quarter witnessed growth in demand for spaces in the 7,500-9,999 square foot range. Lease terms remained steady, with 36-month and 60-month leases capturing the bulk of the market.

Investors have actively turned their attention towards secondary and tertiary markets, seeking higher yields in growing markets. Investment sales rose 11.0 percent from the third quarter, and a noticeable 18.0 percent year-over-year. Nationally, 68.0 percent of REALTORS® reported completing a sales transaction during the quarter. Prices decreased 4.0 percent compared with a year ago. Cap rates rose for all office properties, except hotels.

Due to the inventory mix, the average transaction price rose from slightly under $1.0 million to $1.2 million in the fourth quarter. Commercial practitioners continued to find financing as the top obstacle in closing deals, followed closely by available inventory. Based on respondent comments, market trends have been geographically distinct, with select regions posting marked improvement in leasing and sales activity.

For the full report along with respondent comments, please visit

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