Report: Modest Q3 Growth in US Commercial Markets

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The U.S. commercial real estate market is witnessing steady but modest leasing growth during the third quarter, while purchases were higher than last year, according to the National Association of Realtors. 

Leasing activity increased two percent in the third quarter from the second quarter, NAR reports. 

"Jobs are the key driver for commercial real estate, and the accumulation of 7 million net new jobs from the low point a few years ago is steadily showing up as demand for leasing and purchases of properties," NAR chief economist Lawrence Yun said in the report. "But the difficulty of accessing loans remains a hindrance to a faster recovery."

Commercial investments in properties costing more than $2.5 million increased 26 percent during the third quarter, compared to last year. Prices for large properties were nine percent higher than last year, NAR reports. 

There have been some shifts in commercial purchases as investors look for better yields, often finding them in smaller commercial properties in secondary and tertiary markets, the firm said.

"Sales of commercial properties costing less than $2.5 million in the third quarter were 11 percent above a year ago, while prices for smaller properties were 4 percent above the third quarter of 2012," Mr. Yun said. 

NAR expects vacancy rates to drop 0.2 percentage points in the coming year for the office market, 0.6 point in industrial, and 0.5 point for retail real estate. The average multifamily vacancy rate will increase 0.1 percent, but the sector will continue to have the tightest availability and biggest rent increases, according to NAR.

More from the report:

• Vacancy rates in the office sector are expected to decline from a projected 15.6 percent in the fourth quarter to 15.4 percent in the fourth quarter of 2014. Office rents should increase 2.4 percent this year and 2.5 percent in 2014.

• Industrial vacancy rates are likely to fall from 9.2 percent in the fourth quarter of this year to 8.6 percent in the fourth quarter of 2014. Annual industrial rents are expected to rise 2.3 percent this year and 2.5 percent in 2014. Net absorption of industrial space nationally is anticipated at 97.0 million square feet in 2013 and 104.9 million next year.

• Retail vacancy rates are forecast to decline from 10.4 percent in the fourth quarter of this year to 9.9 percent in the fourth quarter of 2014. Average retail rents should increase 1.4 percent in 2013 and 2.2 percent next year. Net absorption of retail space is projected at 11.0 million square feet in 2013 and 18.1 million next year.

• The apartment rental market - multifamily housing - is likely to see vacancy rates edge up 0.1 percentage point from 3.9 percent in the fourth quarter to 4.0 percent in the fourth quarter of 2014, with new construction helping to meet higher demand. Average apartment rents are forecast to rise 4.0 percent this year and 4.3 percent in 2014. Multifamily net absorption is projected to total 239,400 units in 2013 and 211,300 next year.