Commercial Real Estate Feels the Credit Crunch
Activity is slowing in commercial real estate sectors in response to tightening credit and slow economic growth, according to the latest Commercial Real Estate Outlook of the National Association of Realtors (NAR).
Activity is slowing in commercial real estate sectors in response to tightening credit and slow economic growth, according to the latest Commercial Real Estate Outlook of the National Association of Realtors (NAR).
Office vacancy rates are expected to increase to 14.4 percent in the second quarter of 2009 from 12.9 percent in the second quarter of this year. Annual rent growth in the office sector should be 3.2 percent this year before contracting 0.4 percent in 2009; it rose 8.0 percent last year.
Net absorption of office space in 57 markets tracked, which includes the leasing of new space coming on the market as well as space in existing properties, is projected at 14.7 million square feet this year and 10.9 million in 2009, down from 57.3 million square feet last year.
Tightening credit availability is more pronounced in the commercial sector than in the residential sector, says Lawrence Yun, NAR chief economist.
"Combined with a slowing economy, the lack of credit is curtailing activity in the commercial real estate sectors,” says Yun. “As a result, there's been a slowdown in the net absorption of space, which is leading to higher vacancies and more modest rent growth."
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