Slow growth for U.S. commercial real estate in 2012, office sector will do worst

New York /
Jan.January 03, 2012 01:00 PM

The next year will bring slow but continued growth across all sectors of commercial real estate nationally, Grubb & Ellis’ 2012 National Real Estate Forecast released today says.

The multi-family and hospitality sectors will perform best, with office leasing performing the worst of all commercial sectors. Equilibrium in office markets nationally will remain elusive due to financial uncertainty in Europe. The “flight to quality” continues in most U.S. office markets, and subpar growth through the end of 2012 is expected, the report says. The national vacancy rate should reach 15.7 percent by year-end, net absorption should reach 52 million square feet, and new supply 9 million square feet.

The industrial market will remain relatively strong due to the lack of new supply, with large warehouse/distribution assets performing best. The price for warehouse/distribution space is expected to increase to $4.44 per square foot in 2012 from $4.23 per square foot in 2011. Smaller industrial spaces will recover more slowly, closer to the pace of the office market, the forecast predicts.

In the retail sector, leasing rates will not rise as consumer confidence will continue to lag due to depressed home prices. Retail landlords in struggling regions will continue to seek out non-traditional tenants, the report speculates.

The multi-family housing sector will continue to see rent increases as constrained inventory, high standards to qualify for financing, and the growth of the 18- to 34-year-old demographic boost prices.

“The wild card this year is the unresolved European debt crisis, which has the potential to send lenders and investors to the sidelines,” Robert Bach, Grubb & Ellis’ chief economist said. “If they stay in the game, expect overall commercial real estate sales to rise 25 percent in 2012, generating marginally lower cap rates for non-distressed assets.”

Across all sectors, the number of distressed properties will remain high, the report says, but fewer such properties will be offered by banks and more will be offered by CMBS servicers, the report said.— Guelda Voien


Related Articles

arrow_forward_ios
Instacart CEO Apoorva Mehta (Getty)
Instacart to build fulfillment centers near supermarkets
Instacart to build fulfillment centers near supermarkets
The last mile-high club: Brokers adapt to a booming industrial market
The last mile-high club: Brokers adapt to a booming industrial market
The last mile-high club: Brokers adapt to a booming industrial market
Velocis co-founders Jim Yoder, Fred Hamm and Mike Lewis (Velocis, Getty)
PE firm Velocis snaps up a pair of Dallas-area industrial sites
PE firm Velocis snaps up a pair of Dallas-area industrial sites
ROX Financial president Anthony Moro (Getty, iStock)
Single Amazon warehouse to file for IPO
Single Amazon warehouse to file for IPO
(Getty)
Bulk warehouse rent surges 13% in a year as industrial boom powers on
Bulk warehouse rent surges 13% in a year as industrial boom powers on
From left: former Normandy partner Jeff Gronning, 333 Johnson Avenue, Royalton Capital’s Jin Lee and Sciame Construction’s Frank Sciame (Royalton Capital, Sciame, Normandy)
Sciame, Royalton win round in suit against Normandy involving Netflix lease
Sciame, Royalton win round in suit against Normandy involving Netflix lease
79 Clifton Place in Clinton Hill, Brooklyn and Freo Group CEO Matthias Luecker
Freo Group shops Clinton Hill multifamily for $35M
Freo Group shops Clinton Hill multifamily for $35M
215 West 84th Street and Naftali Group CEO Miki Naftali (Google Maps, Getty)
After $71M building purchase, Naftali tells tenants to scram
After $71M building purchase, Naftali tells tenants to scram
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...