Commercial real estate vacancy rates are flat, and projections for improvement have been moderated because economic growth and job creation have been weaker than expected, but modest improvements are expected over the coming year, according to the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said the weakening economy will slow the growth in demand for space. “Disappointing economic growth in recent months means a slower recovery for most of the commercial real estate sectors, although multifamily housing continues to benefit from pent-up demand resulting from an abnormal slowdown in household formation in recent years,” he said. “Many young people, who normally would have struck out on their own from 2008 to 2010, had been doubling up with roommates or moving back into their parents’ homes. However, they’ve been entering the rental market as new households in stronger numbers this year. As a result, apartment vacancy rates are declining and rents are rising at faster rates.”
Growth in the gross domestic product slowed to 0.4 percent in the first quarter and 1.3 percent in the second quarter, much lower than the 4 to 5 percent expansion needed after a recession.