Commercial Real Estate Markets Stabilizing, According to NAR

Apr 30, 2001, 01:00 ET from National Association of Realtors

    WASHINGTON, April 30 /PRNewswire/ -- Commercial market sectors slowed
 during the last three months of 2000, but a general improvement is expected
 during the second half of this year, according to THE NATIONAL ASSOCIATION OF
 REALTORS(R) COMMERCIAL REAL ESTATE QUARTERLY.  The report covers a wide range
 of statistics and market rankings for the five major commercial sectors during
 the fourth quarter of 2000*, including the office, warehouse, retail, lodging
 and multifamily markets, as well as market sector forecasts for 2001.
     Dr. David Lereah, NAR's chief economist, said a relative weakness in
 fourth quarter commercial markets should stabilize during the first half of
 2001, as most markets adjust to a slower economic environment.  "However, the
 expected economic rebound in the second half of this year should bode well for
 all commercial real estate markets.  Vacancy rates should remain generally
 low, while rent increases will be modest compared to the overall rate of
 inflation," he said.  "The double-digit rent hikes we observed in a number of
 major markets will not be repeated in 2001, given generally weaker economic
 conditions," he added.
     For the office market, NAR reported that the slowing economy and dot-com
 failures had a negligible impact in the 54 major markets tracked in the fourth
 quarter, boosting inventory levels 2.9 percent.  The vacancy rate was 9.9
 percent for all of 2000, down from 10.3 percent in 1999.  Inflation-adjusted
 office rent rose an average 7.0 percent last year.  Construction climbed to 59
 million square feet in the fourth quarter, up 7.0 percent from 1999.
     The association expects positive but moderating office demand growth in
 2001.  However, new space coming on line will consistently outpace demand, and
 vacancy rates are expected to rise to 10.8 percent this year.  Inflation-
 adjusted rents will grow at a more sustainable pace of 3.8 percent in 2001.
 Based on rent growth, the hottest office markets expected this year are
 Boston, Austin, San Jose, San Diego and Orange County, Calif.
     In the warehouse market, NAR reported inventory growth slowed as a result
 of manufacturing weakness, which subtracted 0.62 percentage points from
 overall gross domestic product (GDP) growth in the fourth quarter.  Net
 absorption in the 54 markets tracked declined to 30 million square feet during
 the fourth quarter, but on an annualized basis a total of 135 million square
 feet was absorbed, up 3.0 percent from 1999.  Meanwhile, completions of
 warehouse space dropped 5.6 percent from the third quarter to 34 million
 square feet.  This raised inventory 2.9 percent to a total of 4.9 million
 square feet in 2000, while the space availability rate was 7.3 percent last
 year, down 0.1 percent from 1999.  Construction totaled 191 million square
 feet in 2000, the highest level since 1994.
     The association projects the outlook for warehouse space to be strong but
 weaker in 2001.  Net absorption should drop 28.9 percent from 1999 to a total
 of 96 million square feet this year.  The national availability rate should
 rise from 7.4 percent in the first quarter to 7.7 percent by the end of the
 year.  Warehouse rents, adjusted for inflation, are projected to rise 1.2
 percent in 2001.  Based on rent growth, the hottest warehouse markets are
 expected to be in Milwaukee; Palm Beach County, Fla.; Orange Country, Calif.;
 Riverside, Calif.; and East Bay, Calif.
     In the retail market, NAR reports 26 million square feet was absorbed in
 the fourth quarter, down 17.0 percent from the third quarter.  Although this
 reflects the closure of retailers such as Montgomery Ward and Bradlees, this
 absorption level is still considered strong.  At the same time, net new space
 completions totaled 31 million square feet.  The national vacancy rate for all
 of 2000 was relatively low at 9.5 percent, down 0.7 percentage points from
 1999.  Rents rose at an inflation-adjusted 3.2 percent in the fourth quarter,
 down from a 3.6 percent growth in the third quarter.  Construction starts in
 the 54 markets tracked were at 38 million square feet in the fourth quarter,
 down 22.4 percent from the third quarter.
     The association projects that net absorption will slow in the first half
 of the year, then rise during the second half.  The vacancy rate in the 54
 markets tracked is expected to rise to 9.9 percent in 2001 from 9.5 percent
 last year.  Rents are expected to rise an inflation-adjusted 1.8 percent this
 year.  Based on rent growth, the hottest retail markets are expected to be in
 Palm Beach County, Fla.; San Francisco; Portland, Ore.; Denver and Houston.
     In the lodging market, the association reports demand growth remained a
 healthy 3.7 percent in 2000, even exceeding room supply additions.  This
 resulted in a 0.4 percentage point increase in the room occupancy rate to 63.5
 percent in 2000.  At the same time, average daily room rates rose 4.9 percent.
 Revenue per available room grew by an inflation-adjusted 2.1 percent in 2000.
 Construction in the 54 markets tracked stood at 9.8 million square feet in the
 fourth quarter, near the lowest level in the last four years.
     NAR expects lodging demand growth to subside in 2001, resulting from a
 general softening in lodging fundamentals.  Revenue per available room is
 expected to grow 3.3 percent this year.  Based on revenue per available room,
 the hottest lodging markets this year are expected to be in Boston; Los
 Angeles; San Francisco; Orange County, Calif.; and Riverside, Calif.
     In the multifamily sector, the association reports strong activity as the
 renter population increased in the fourth quarter, resulting in a net
 absorption of approximately 42,200 units.  At the same time, net completions
 of new rental units were high at 52,300 units in the fourth quarter.  In the
 54 markets tracked, rental vacancy rates were relatively low at 5.0 percent in
 the fourth quarter.  Inflation-adjusted rents rose a solid 5.2 percent in the
 same time frame.  Construction rose 3.0 percent from the third quarter to
 62,200 units in the fourth quarter.
     NAR's outlook for multifamily housing projects solid demand through the
 first half of the year, moderating in the second half.  As a result, the
 vacancy rate in the 54 markets tracked is expected to rise gradually to 5.5
 percent in 2001.  Inflation-adjusted rent is projected to rise 2.9 percent
 this year.  Based on rent growth, the hottest multifamily markets are expected
 to be in Austin, San Diego, San Jose, Northern New Jersey and East Bay, Calif.
     NAR will release first quarter data on July 2, and the second quarter
 report on September 27.  A forecast for 2002 will be released at the Annual
 Conference in Chicago on Nov. 2.  A new forecasting model will enhance NAR's
 commercial series, beginning with the first quarter report this summer.
 
     The National Association of Realtors(R), "The Voice for Real Estate," is
 America's largest trade association, representing more than 760,000 members
 involved in all aspects of the residential and commercial real estate
 industries.
 
     *Collection of commercial statistics lags behind the residential market
 because comparable databases are not yet available.
 
     Information about NAR is available at http://nar.realtor.com .  This and
 other news releases are posted in the Web site's "News for You" section, at
 http://nar.realtor.com/news .  Additional statistical data may be found at
 http://nar.realtor.com/databank/sales.htm .
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X28232665
 
 

SOURCE National Association of Realtors
    WASHINGTON, April 30 /PRNewswire/ -- Commercial market sectors slowed
 during the last three months of 2000, but a general improvement is expected
 during the second half of this year, according to THE NATIONAL ASSOCIATION OF
 REALTORS(R) COMMERCIAL REAL ESTATE QUARTERLY.  The report covers a wide range
 of statistics and market rankings for the five major commercial sectors during
 the fourth quarter of 2000*, including the office, warehouse, retail, lodging
 and multifamily markets, as well as market sector forecasts for 2001.
     Dr. David Lereah, NAR's chief economist, said a relative weakness in
 fourth quarter commercial markets should stabilize during the first half of
 2001, as most markets adjust to a slower economic environment.  "However, the
 expected economic rebound in the second half of this year should bode well for
 all commercial real estate markets.  Vacancy rates should remain generally
 low, while rent increases will be modest compared to the overall rate of
 inflation," he said.  "The double-digit rent hikes we observed in a number of
 major markets will not be repeated in 2001, given generally weaker economic
 conditions," he added.
     For the office market, NAR reported that the slowing economy and dot-com
 failures had a negligible impact in the 54 major markets tracked in the fourth
 quarter, boosting inventory levels 2.9 percent.  The vacancy rate was 9.9
 percent for all of 2000, down from 10.3 percent in 1999.  Inflation-adjusted
 office rent rose an average 7.0 percent last year.  Construction climbed to 59
 million square feet in the fourth quarter, up 7.0 percent from 1999.
     The association expects positive but moderating office demand growth in
 2001.  However, new space coming on line will consistently outpace demand, and
 vacancy rates are expected to rise to 10.8 percent this year.  Inflation-
 adjusted rents will grow at a more sustainable pace of 3.8 percent in 2001.
 Based on rent growth, the hottest office markets expected this year are
 Boston, Austin, San Jose, San Diego and Orange County, Calif.
     In the warehouse market, NAR reported inventory growth slowed as a result
 of manufacturing weakness, which subtracted 0.62 percentage points from
 overall gross domestic product (GDP) growth in the fourth quarter.  Net
 absorption in the 54 markets tracked declined to 30 million square feet during
 the fourth quarter, but on an annualized basis a total of 135 million square
 feet was absorbed, up 3.0 percent from 1999.  Meanwhile, completions of
 warehouse space dropped 5.6 percent from the third quarter to 34 million
 square feet.  This raised inventory 2.9 percent to a total of 4.9 million
 square feet in 2000, while the space availability rate was 7.3 percent last
 year, down 0.1 percent from 1999.  Construction totaled 191 million square
 feet in 2000, the highest level since 1994.
     The association projects the outlook for warehouse space to be strong but
 weaker in 2001.  Net absorption should drop 28.9 percent from 1999 to a total
 of 96 million square feet this year.  The national availability rate should
 rise from 7.4 percent in the first quarter to 7.7 percent by the end of the
 year.  Warehouse rents, adjusted for inflation, are projected to rise 1.2
 percent in 2001.  Based on rent growth, the hottest warehouse markets are
 expected to be in Milwaukee; Palm Beach County, Fla.; Orange Country, Calif.;
 Riverside, Calif.; and East Bay, Calif.
     In the retail market, NAR reports 26 million square feet was absorbed in
 the fourth quarter, down 17.0 percent from the third quarter.  Although this
 reflects the closure of retailers such as Montgomery Ward and Bradlees, this
 absorption level is still considered strong.  At the same time, net new space
 completions totaled 31 million square feet.  The national vacancy rate for all
 of 2000 was relatively low at 9.5 percent, down 0.7 percentage points from
 1999.  Rents rose at an inflation-adjusted 3.2 percent in the fourth quarter,
 down from a 3.6 percent growth in the third quarter.  Construction starts in
 the 54 markets tracked were at 38 million square feet in the fourth quarter,
 down 22.4 percent from the third quarter.
     The association projects that net absorption will slow in the first half
 of the year, then rise during the second half.  The vacancy rate in the 54
 markets tracked is expected to rise to 9.9 percent in 2001 from 9.5 percent
 last year.  Rents are expected to rise an inflation-adjusted 1.8 percent this
 year.  Based on rent growth, the hottest retail markets are expected to be in
 Palm Beach County, Fla.; San Francisco; Portland, Ore.; Denver and Houston.
     In the lodging market, the association reports demand growth remained a
 healthy 3.7 percent in 2000, even exceeding room supply additions.  This
 resulted in a 0.4 percentage point increase in the room occupancy rate to 63.5
 percent in 2000.  At the same time, average daily room rates rose 4.9 percent.
 Revenue per available room grew by an inflation-adjusted 2.1 percent in 2000.
 Construction in the 54 markets tracked stood at 9.8 million square feet in the
 fourth quarter, near the lowest level in the last four years.
     NAR expects lodging demand growth to subside in 2001, resulting from a
 general softening in lodging fundamentals.  Revenue per available room is
 expected to grow 3.3 percent this year.  Based on revenue per available room,
 the hottest lodging markets this year are expected to be in Boston; Los
 Angeles; San Francisco; Orange County, Calif.; and Riverside, Calif.
     In the multifamily sector, the association reports strong activity as the
 renter population increased in the fourth quarter, resulting in a net
 absorption of approximately 42,200 units.  At the same time, net completions
 of new rental units were high at 52,300 units in the fourth quarter.  In the
 54 markets tracked, rental vacancy rates were relatively low at 5.0 percent in
 the fourth quarter.  Inflation-adjusted rents rose a solid 5.2 percent in the
 same time frame.  Construction rose 3.0 percent from the third quarter to
 62,200 units in the fourth quarter.
     NAR's outlook for multifamily housing projects solid demand through the
 first half of the year, moderating in the second half.  As a result, the
 vacancy rate in the 54 markets tracked is expected to rise gradually to 5.5
 percent in 2001.  Inflation-adjusted rent is projected to rise 2.9 percent
 this year.  Based on rent growth, the hottest multifamily markets are expected
 to be in Austin, San Diego, San Jose, Northern New Jersey and East Bay, Calif.
     NAR will release first quarter data on July 2, and the second quarter
 report on September 27.  A forecast for 2002 will be released at the Annual
 Conference in Chicago on Nov. 2.  A new forecasting model will enhance NAR's
 commercial series, beginning with the first quarter report this summer.
 
     The National Association of Realtors(R), "The Voice for Real Estate," is
 America's largest trade association, representing more than 760,000 members
 involved in all aspects of the residential and commercial real estate
 industries.
 
     *Collection of commercial statistics lags behind the residential market
 because comparable databases are not yet available.
 
     Information about NAR is available at http://nar.realtor.com .  This and
 other news releases are posted in the Web site's "News for You" section, at
 http://nar.realtor.com/news .  Additional statistical data may be found at
 http://nar.realtor.com/databank/sales.htm .
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X28232665
 
 SOURCE  National Association of Realtors

RELATED LINKS

http://www.realtor.com