Another Report on a Strong Real Estate Economy

Fortune 500 real estate services firm CBRE Group Inc. posted its 2013 wrapup, declaring that the year finished strongly for U.S. commercial real estate, wth office rentals continuing a strong recovery.

The results reported by the Los Angeles-based firm echo other recent Quidnunc items on the strong office market.

The report says that vacancy rates fell in 44 of 63 U.S. office markets the company surveyed, significantly, declining by 30 basis points to 14.8% in 2013's fourth quarter.
 
The drop was the sharpest in six quarters, with a total 2013 vacancy rate decline of 60 basis points--"the best annual performance since 2006," the report says. 
 
Vacancy rates in suburban offices--which have a questionable long-term outlook; see the item on Mack-Cali item in today's Wall Street Journal posted on QuidnuncRE earlier today, HERE--fell for the seventh consecutive quarter to 16.3%, the report says. The "downtown rate fell by to 12.3%," it adds.
 
In a prepared statement, Jon Southard, CBRE Econometric Advisors group's managing director, said that while the big office vacancy rate decline "was impressive given the headwinds facing the U.S. economy," the 14.8% office vacancy rate "remains elevated compared with pre-recessionary levels.” 
 
He said CBRE projects office demand "to strengthen appreciably in 2014," citing continued  payroll and and employment growth," and the company forecasts the office vacancy rate will fall to 14.3% by year end.
 
In addition,
  • The report notes that the national industrial market availability rate--defined as space that is actively being marketed and available for tenant build-out within 12 months--was at 11.3%, the 14th consecutive quarter of decline. The rate declined 140 basis points last year, CBRE reports, "and is now 330 [basis points] below its recessionary peak," with another 30-point decline forecast for 2014.
  • The retail availability rate also declined significantly, to 12.0%, but New York was one of only five markets, along with San Diego, Albuquerque, Raleigh and Tampa, with higher availability than in 2012's fourth quarter. CBRE forecasts a decline to 10.6% for neighborhood and community shopping centers this year.
  • Demand for the nation’s apartment buildings remained strong with vacancy of 5.0% in Q4 2013. Preliminary CBRE  data shows that overall apartment demand grew strongly in 2013's fourth quarter, with the vacancy rate for "professionally-managed apartment units" at 5%, "holding steady relative to a year earlier." The report forecasts that the U.S. multi-housing market vacancy rate will average 5.3% in 2014.

"Commercial real estate closed out 2013 on an encouraging note,” said Jon Southard in the press statement. "Strong demand for space across all product categories bodes well for real estate investment and for the economy."

You can see the full CBRE press release on the company's website HERE.

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