Report: Multifamily Leads Commercial Sector

But office, industrial and retail will see higher rents, lower vacancies in 2015.

Multifamily vacancy rates are expected to tick up over the next 12 months—from 4 to 4.3 percent—but this type of commercial real estate is still performing strongly, the National Association of Realtors reported.

Vacancies are still below 5 percent, after all. (Sacramento and Orange County, Calif., had the lowest multifamily vacancy rate at 2.2 percent.) That will help support projected rent increases of 4 percent this year and 3.9 percent in 2015.

“Low housing inventory and the sizable demand for rentals will continue to spur multifamily construction as well as keep rents rising above inflation through next year,” said Lawrence Yun, the NAR’s chief economist.

Office, retail and industrial real estate will all see declines in their vacancy rates, but they also have higher numbers to begin with. By the end of 2015, they’re expected to have rates of 15.7, 9.5 and 8.4 percent, respectively.

These other three types of commercial properties will also see higher average rent increases in 2015: 3.3 percent for offices, compared to 2.4 percent this year;  2.9 percent for industrial, compared to 2.4 percent in 2014; and 2.5 percent for retail, up from 2 percent this year.

Yun cautioned that slowdowns in other parts of the world could eventually affect commercial real estate in the United States, but for now, the strengthening U.S. economy means employers need extra space for their new hires and families have more money to go shopping.

“Solid economic growth in the third quarter proved that the second quarter wasn’t an anomaly, as business spending increased, commercial construction rose and the labor market continued to make positive strides,” he said. “Job growth is the catalyst to improved demand for commercial real estate leasing and new construction projects.”

Article compliments of Community Investor Magazine.