Now the non-residential real estate sector is showing some signs of life. Downtowns across the country are seeing occupancy increases, though the majority of suburban markets are still languid. In the boom years, many suburban office properties were occupied by real estate and title companies, which have since downsized significantly.
The most important aspect of the current market is the lack of new supply. There are some projects underway, and the non-residential construction data show a bit of improvement. Generally, though, there are trivial amounts of speculative new space coming to market. So far that has not been a problem: there’s been no need for new office space, given the very slow pace of job growth.
Looking forward into 2013, though, employment should improve. This assumes that the rest of the world makes progress. Vacancy rates will fall and landlords will start nursing their rents upward. If we ever get a real surge of employment, then many local markets will be caught with insufficient supply. However, that surge is an upside risk, not part of the main economic forecast.
|1110 Vermont Avenue NW (center building) in Washington, D.C., in the United States. This is a 12-story high-rise office building constructed in 1980. The commercial real estate firm of Tishman Speyer acquired 1110 Vermont Avenue NW (which has 305,000 square feet of interior space) for more than $103.5 million. To the left is 1100 Vermont Avenue NW, a building designed by Vlastimil Koubek and built in 1979. To the right is 1120 Vermont Avenue NW, a 12-story office building constructed in 1981. (Photo credit: Wikipedia)|
In today’s commercial real estate environment, tenants should try to extend their leases as long as possible. Landlords should try to wait out this slump in anticipation of rents firming next year and into 2014. Contractors should take up stamp collecting—they’ll have plenty of time on their hands before new projects start to pencil out.
Taken from: http://www.forbes.com/sites/billconerly/2012/07/25/commercial-real-estate-forecast-2012-2013/