Need Corporate Hiring To Continue
First quarter commercial real estate market fundamentals in 2011 continued their improvement over 2010. This will come as no surprise to anyone who understands that commercial real estate demand is derived from activity in the overall economy. As the economy goes, so go commercial real estate fundamentals.
Office Market
According to CoStar’s first quarter reports, the office market saw a positive net absorption of 8.8 million square feet of office space. This marks the fourth consecutive quarter of positive net absorption with almost 48 million square feet added over the last 12 months. For comparison, the previous twelve months saw the market lose 28.8 million square feet.
Office vacancy rates held steady at 12.6 percent, even in the face of a slight rise in new deliveries.
CoStar’s quarterly reports also show that office rental rates turned slightly downward after a fourth quarter rise, which was the first in 10 quarters. With office construction at a record 10-year low, there is no denying that an increase in corporate hiring would accelerate the strengthening of office market fundamentals.
Retail Market
CoStar is also showing a positive net absorption of 10.1 million square feet of retail space in the first quarter of this year. A total of 65 million square feet was added during the last 12 months, which is more than four times the amount added in the previous twelve months. Even with major retailers like Borders and K-Mart closing up big box stores around the country, the retail vacancy rates continued their decline, dropping to 7.1 percent, down from the market high of 7.4% in 2009.
Thankfully, retail space deliveries resumed their decline after increasing in the fourth quarter, falling 50 percent from their first quarter 2010 level and rental rates continued their decline albeit at a slower pace. Read more