The National Association of Realtors (NAR) is confident that vacancy rates of commercial Real Estate in the US have already reached its peak and would soon fall. The realty group expects vacancy rate for existing office spaces to rise to 16.7% in the fourth quarter of this year. It is also optimistic that the rate would gradually drop to 16.4% on the fourth quarter of 2011.
The group's index that measures commercial Real Estate conditions climbed 1.6 percentage points in the third quarter to 42.6. That is still way below the equilibrium level of 100, which represents balance in the marketplace. It could be recalled that the last time equilibrium was reached in the commercial Real Estate market was in 2007 (third quarter). The index remained weak, but it marked a fourth consecutive quarterly rise.
The group also expects rental fees in the commercial property market to continue declining. This is because the vacancy rates remain and is expected to remain high despite slow improvements. High vacancy rates equate to falling rental fees, in accordance to law of supply and demand.
Analysts from NAR emphasized that their outlook for industrial and office markets remain moderate. They expect vacancy rates to modestly decline in the coming months until the end of next year. However, the retail sector, according to them, is expected to hold fairly steady.
Market observers note that a sluggish commercial property market has been dragging down overall economic growth in the last 2.5 years. They added that the weak commercial Real Estate market has also been affecting the gross domestic product figures in nine out of the last 10 quarters.
Rate of vacancy in apartment rental buildings is forecast to drop to 5.8% in the fourth quarter of 2011. It is expected to rise to about 6.4% in the fourth quarter of this year.
NAR's commercial property report and analysis came amid a streak of several good news for the Real Estate industry in the third quarter. The US Federal Deposit Insurance Corporation has recently announced that the growth of default rates in commercial property mortgages modestly rose to 4.36% in the quarter from 4.27% in the preceding quarter.
Housing and Real Estate conditions across major property markets in the US continue to post encouraging third quarter results and data.