When we think about the residential real estate market we know it’s segmented into Condo’s, Townhouses, Single Family Residences, Duplexes and Triplexes. Pretty simple and they all serve the same purpose – housing people. The commercial market is different; its segments are diverse in the physical makeup, purpose and how they are valued.
Office Market: A commercial property type used to maintain or occupy professional or business offices. Such properties typically house management and staff operations. The term office can refer to whole buildings, floors, parts of floors, and office parks. Office space that can be used for a variety of purposes is sometimes referred to as generic office space. Office properties may be classified as Class A, B, or C. Class A properties are the most functionally modern. Properties Classed B and C in the same market typically command lower rents because they are older and in need of modernization. They may not be as efficient or desirable as Class A properties because their design or condition causes functional problems. (defined as by the Realtors Commercial Alliance)
Market update: “Vacancy rates in the office sector are expected to decline from a projected 15.7 percent in the third quarter to 15.5 percent in the third quarter of 2014.
The markets with the lowest office vacancy rates presently (in the third quarter) are Washington, D.C., with a vacancy rate of 9.7 percent; New York City, at 9.8 percent; Little Rock, Ark., 12.1 percent; and Birmingham, Ala., 12.4 percent.
Office rents should increase 2.5 percent this year and 2.8 percent in 2014. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is seen at 30.1 million square feet this year and 41.6 million in 2014.” According to Walter Molony of NAR (National Association of Realtors).
Industrial Market: Commercial properties that are used for the purposes of production, manufacturing, or distribution.
Market update: “Industrial vacancy rates are likely to fall from 9.3 percent in the third quarter of this year to 8.7 percent in the third quarter of 2014.
The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 3.8 percent; Los Angeles, 4.0 percent; Miami, 5.9 percent; and Seattle at 6.4 percent.
Annual industrial rents are expected to rise 2.4 percent this year and 2.6 percent in 2014. Net absorption of industrial space nationally is anticipated at 102.0 million square feet in 2013 and 105.8 million next year.” NAR
Retail: Where goods and services are sold to the consumer. Retail has two forms: “shop” retail, such as malls and store fronts. “Non-shop” retailing such as online retailing, B2C (business to consumer) and mail order.
Market update: “Retail vacancy rates are forecast to decline from 10.6 percent in the third quarter of this year to 10.0 percent in the third quarter of 2014.
Presently, markets with the lowest retail vacancy rates include San Francisco, 3.9 percent; Fairfield County, Conn., at 4.1 percent; Long Island, N.Y., 5.0 percent; and Orange County, Calif., at 5.5 percent.
Average retail rents should increase 1.5 percent in 2013 and 2.3 percent next year. Net absorption of retail space is projected at 11.8 million square feet in 2013 and 18.2 million next year.” NAR
Hospitality: Property that includes lodging, restaurants, event centers, and even theme parks and resorts.
Market update: Hospitality real estate investment trusts posted a 10.52 percent total return for the first six months of the year, coming in ahead of all other major property sector REITs, according to the National Association of Real Estate Investment Trusts’ 2Q13 REIT
Multifamily: Housing units that accommodate more than one family or household.
Market update: “The apartment rental market – multifamily housing – is likely to see vacancy rates edge up only 0.1 percentage point from 3.9 percent in the third quarter to 4.0 percent in the third quarter of 2014, with construction rising to meet increased demand. Generally, vacancy rates below 5 percent are considered a landlord’s market where demand justifies higher rent.
Areas with the lowest multifamily vacancy rates currently are New Haven, Conn., at 1.9 percent; Syracuse, N.Y., 2.0 percent; New York City and San Diego, at 2.1 percent each; and Minneapolis, 2.2 percent.
Average apartment rents are forecast to rise 4.0 percent this year and another 4.0 percent in 2014. Multifamily net absorption is projected to total 266,700 units in 2013 and 259,800 next year.” NAR
Still time to join my online class that just started last week.