Real Estate Central

WASHINGTON, May 15 /PRNewswire-USNewswire/ — Commercial real estate
conditions are uneven across the country and vary notably in some areas,
according to a commercial real estate update and forecast presented here at
the National Association of Realtors(R) Midyear Legislative Meetings &
Trade Expo.

NAR Chief Economist Lawrence Yun said that just like residential real
estate, performance in the commercial sectors is greatly mixed across the
country. “It’s just as important to understand local market variations in
commercial real estate as it is in the residential sector because local
conditions can vary considerably,” he said. “Commercial fundamentals are
good, but investment has been hurt by the credit crunch - investment in the
commercial sectors decelerated in the first quarter after setting a record
in 2007.”

During the first three quarters of 2007, commercial real estate
investment was in excess of $100 billion per quarter. In the first quarter
of 2008 it slowed to the range of $35 billion to 38 billion.

In analyzing NAR’s Commercial Leading Indicator for Brokerage Activity,
which will be updated May 21, Yun said to expect broadly slower net
absorption for office and industrial space. “I see a topping off in
commercial building construction, and a decline in private non-residential
construction spending,” he said. “We project generally softer rent growth
in commercial real estate, and modestly lower business opportunities in
most market areas for commercial practitioners. As in the residential
sector, areas with strong job growth are doing fairly well.”

Overall job gains are slowing, but retail employment has been weak
since the beginning of this year, construction jobs have been trending down
since the beginning of last year, and manufacturing jobs have been trending
down since the start of the decade, Yun noted. “On the other hand,
professional business service jobs have been rising since the middle of
2003, and that supports demand in the office market. Wholesale trade jobs
have trended up since the middle of 2004, reflecting stronger international
trade conditions.”

Job growth has been strongest in Colorado, Louisiana, Texas,
Washington, Wyoming and Utah. Job losses are greatest in Arizona,
California, Florida, Michigan, Nevada, and Ohio.

Even with concerns about inflation and consumer confidence, and
weakness of the dollar, corporate profits have been near record highs.
Exports are growing faster than imports, and business spending on equipment
and software has trended up strongly since the beginning of 2003.

“Altogether, I don’t expect a recession, but rather a period of slow
economic growth that should improve in the second half of this year,” Yun
said.

The NAR forecast for major commercial sectors includes analyses of
quarterly data for various tracked metro areas. The sectors are the office,
industrial, retail and multifamily markets. Metro data were provided by
Torto Wheaton Research and Real Capital Analytics.

Office Market

Net absorption of office space in 57 markets tracked, including the
lease of new space coming on the market as well as space in existing
properties, should decline from 21.2 million in the second quarter of 2007
to 8.7 million in the current quarter.

Office vacancy rates are forecast to average 13.3 percent in the fourth
quarter, up from 12.5 percent a year earlier. Annual rent growth in the
office sector is likely to be 3.5 percent in 2008, compared with 8.0
percent last year.

Industrial Market

Net absorption of industrial space in 58 markets tracked is estimated
to edge down from 35.4 million square feet in the second quarter of last
year to 33.3 million in the second quarter of 2008.

Industrial vacancy rates nationally will probably rise to 9.6 percent
in the fourth quarter from 9.4 percent in the same period in 2007. Annual
rent growth should be 3.3 percent by the end of 2008, compared with 3.6
percent in the fourth quarter of last year.

Retail Market

Net absorption of retail space in 53 tracked markets is seen to rise
from a negative 169,000 square feet in the second quarter of last year to
6.4 million square feet in the current quarter.

Vacancy rates are projected to decline to 8.8 percent by the fourth
quarter from 9.2 percent at the end of last year. Rents are forecast to
rise an average of 1.4 percent in 2008 compared with a 3.2 percent increase
last year.

Multifamily Market

Net absorption in the apartment rental market - multifamily housing -
is expected to rise slightly in 59 tracked metro areas, from 70,700 units
in the second quarter of 2007 to 71,800 units in the current quarter.

Vacancy rates are projected to average 4.8 percent in the fourth
quarter, down from 5.1 percent at the end of 2007. Rents are likely to rise
3.8 percent in 2008, up from a 3.1 percent gain last year.

The National Association of Realtors(R), “The Voice for Real Estate,”
is America’s largest trade association, representing 1.2 million members
involved in all aspects of the residential and commercial real estate
industries.

The next Commercial Leading Indicator index will be May 21; the next
commercial real estate market forecast is scheduled for June 18.

Information about NAR is available at http://www.realtor.org. This and other
news releases are posted in the News Media section. Statistical data,
charts and surveys also may be found by clicking on Research.



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Source: Real Estate Newswire