US Commercial Rents Moving Higher

---

Good news for apartment developers. Average apartment rents in the U.S. are expected to increase 4.0 percent this year and another 4.0 percent in 2014, according to the National Association of Realtors.

The vacancy rate for U.S. apartments is predicted to increase only 0.1 percentage point reaching 4.0 percent during the third quarter, despite a wave of new construction. In general, vacancy rates below 5 percent are characterized as a landlord's market, NAR reports.

Net absorption for the multifamily housing market is projected to total 266,700 units in 2013 and 259,800 next year, NAR reported in its quarterly commercial real estate forecast.

The NAR report also looked at other commercial market segments. Office rents are expected to increase 2.5 percent this year and 2.8 percent in 2014, with net absorption of office space, including the leasing of new and existing space, predicted to reach 30.1 million square feet this year and 41.6 million in 2014, NAR reports.

Annual industrial rents should increase by 2.4 percent in 2013 and 2.6 percent next year with net absorption of industrial space at 102.0 million square feet in 2013 and 105.8 million next year.

Retail markets are expected to have the lowest average rents increase, going up 1.5 percent in 2013 and 2.3 percent next year with net absorption projected at 11.8 million square feet in 2013 and 18.2 million next year.

While the multifamily housing market is expected to report the tightest availability in the coming year, national vacancy rates are expected to decrease 0.2 percentage points in the office market, 0.6 points in industrial and 0.6 points for retail, NAR reports.

"Office vacancies haven't declined much because total jobs today are still below that of the pre-recession level in 2007, but rising international trade is boosting demand for warehouse space," NAR chief economist Lawrence Yun said in the release. "Consumer spending has been favorable for the retail market, and rising construction is keeping apartment availability fairly even, though at low vacancy levels."