Commercial Real Estate Outlook Dampened
With the exception of cash transactions, investment activity in commercial real estate sectors is nearly at a standstill, according to the latest Commercial Real Estate Outlook of the National Association of Realtors (NAR).
With the exception of cash transactions, investment activity in commercial real estate sectors is nearly at a standstill, according to the latest Commercial Real Estate Outlook of the National Association of Realtors (NAR).
Halted commercial lending and job losses curtailing the demand for space are causing the slowdown, says Lawrence Yun, NAR chief economist.
"Although access to residential mortgages has improved, the opposite is true for commercial loans," says Yun. "We need liquidity for commercial mortgage-backed securities not only to free the market, but also to rollover existing debt.”
Office rent is likely to contract next year as erosion in the job market curtails demand for space, according to the NAR quarterly forecast for the office market. Vacancy rates are projected to increase to 16.4 percent in the third quarter of 2009 from 13.4 percent in the third quarter of this year.
Office markets with the lowest vacancies currently include New York, Honolulu and Seattle, all with vacancy rates of 9.6 percent or less. The highest vacancies are in Detroit, Phoenix and Dallas, with vacancies exceeding 20 percent.
Annual rent in the office sector is expected to slip 0.4 percent this year and decline another 3.6 percent in 2009. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is seen at 12.3 million square feet this year before contracting by 63.0 million in 2009.
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