Commercial Real Estate Vacancy Rates
First quarter vacancy rates increased across the four core property types. The drivers of demand for each property type, though slightly different, all weakened in response to the recession. Commercial real estate leasing activity tends to lag the broader economy, meaning that if the economy begins a tepid growth cycle by the end of 2009 (by no means a certainty), commercial real estate may not follow until perhaps the second half of 2010 or 2011. Among the core property types, retail has been hit hardest because the loss of housing and stock market wealth, tighter credit, job losses and households’ newfound propensity to save have cut into retail sales. Ironically, this segment, along with the industrial market, may be the first to turn around due in part to the stimulus package, much of which will support consumer spending either directly through tax cuts and jobless benefits or indirectly through spending programs that will encourage job retention. Because the labor market may be the last economic indicator to recover, the office and apartment markets, which rely on job creation to stimulate tenant demand, may bottom out somewhat later.
Source: Reis, Grubb & Ellis