CBRE: U.S. commercial real estate market shows continued healthy demand during Q4 2015

Six Year Trend of Declining Office Vacancy and Industrial Availability Continues

Los Angeles, 2016-1-12 — /EPR Retail News/ — The U.S. commercial real estate market shows continued healthy demand across all property types during the fourth quarter of 2015 (Q4 2015), according to the latest analysis from CBRE Group, Inc.

In Q4 2015:

  • The office vacancy rate declined 20 basis points (bps) to13.2%. The vacancy rate has not shown an increase in 23 quarters.
  • The industrial availability* rate continued to decline, falling by 20 bps to 9.4%. Industrial availability has also not risen for 23 consecutive quarters.
  • The retail availability rate declined 10 bps to 11.2%, 210 bps below its post-recession peak of 13.3%.
  • Demand for the nation’s apartments remained strong in Q4 2015 with vacancy at 4.6%.

“U.S. commercial real estate had another solid quarter with vacancy rates declining for the office, industrial and retail sectors due to steady absorption and relatively limited supply,” said Jeffrey Havsy, Americas chief economist for CBRE. “Commercial real estate remains in a ‘goldilocks’ state with both demand and supply neither too hot nor too cold. This slow, stable improvement is extremely healthy for the sector, but is at a pace that is sustainable for 2016.”

Office Market
The Q4 2015 office vacancy rate of 13.2% is an 80-bps drop from a year ago. There has been no increase in the national office vacancy rate since the end of Great Recession—23 consecutive quarters. Vacancy rates continued to decline in both suburban and downtown markets in Q4, with the suburban rate falling by 30 bps to 14.7% while downtown dropped 10 bps to 10.3%s—the lowest rate since 2008.

San Jose recorded one of the largest quarterly declines (170 bps), while Chicago, Raleigh and Phoenix declined by 80 bps or more. Overall, markets in California and the South saw the greatest improvement in 2015. Besides San Jose and Raleigh, these include Oakland, Jacksonville, Miami, Atlanta, Sacramento, Orlando and Tampa. The nation’s lowest vacancy rates in Q4 2015 were recorded in San Francisco (6.3%), Nashville (7.5), Austin (7.6%), Albany (8.1%) and San Jose (8.2%).

“Economic fundamentals remain strong and point to continued U.S. office expansion in 2016, supported by a strong domestic job market. The Federal Reserve’s decision to raise interest rates most likely will not affect capital flows into the commercial real estate sector” said Mr. Havsy. ”Recent changes in the Foreign Investment in Real Property Tax Act, and the extension of the EB-5 program should help to increase the flow of foreign capital into U.S. commercial real estate, while strong economic fundamentals will maintain asset valuations despite rising interest rates.”

Industrial Market
The Q4 2015 industrial availability rate of 9.4% underscores the full recovery in the sector that began earlier in the year and continued the move into expansionary territory for this cycle. 23 consecutive quarters of falling availability is the longest stretch since CBRE began tracking the national market in 1989. Thirty-five markets out of 57 industrial markets reported declining availability in Q4. Detroit led the declines with a 120 bps drop. Significant availability declines were also recorded in Dallas and New York (each of which fell 70 bps) and Atlanta (which declined 50 bps).

“The majority of markets continue to improve and few are even experiencing lower levels of available space than has been seen in decades,” noted Mr. Havsy. “Such constraints will continue to provide upward pressure on rent levels, as demand-side fundamentals remain quite favorable for industrial users.”

Retail Market
The Q4 2015 retail availability rate of 11.2% was 20 bps below its year ago rate. Half of the 62 markets tracked saw availability declines in Q4. Denver, Cleveland, San Francisco, Portland and Memphis were among the markets recording availability rate declines of at least 50 bps in the fourth quarter. Austin, Salt Lake City and Atlanta were among those recording the greatest declines compared to one year ago.

“With lower gas prices, easier access to credit and a rapidly improving labor market, consumer spending should continue to grow and the continuing decline in availability should translate into retail rent growth in the coming quarters,” said Mr. Havsy.

Apartment Market
Preliminary data for Q4 2015 shows that the nation’s apartment vacancy rate dropped 10 bps from a year earlier, to 4.6%. Compared to a year earlier vacancy rates declined in 36 of 62 markets while rising in 24 and staying the same in two. Cincinnati (-130 bps), Detroit (-100 bps) and Long Island and Providence (-90 bps each) had the greatest declines in vacancy. The tightest markets include those in the Greater New York area, Los Angeles, Fort Lauderdale, San Francisco, Salt Lake City and Nashville. The market is very tight and apartment demand remains strong as the vacancy rate pushes closer to its 20-year vacancy low of 4.0%.

“Over a longer time horizon, however, additional construction and renewed competition from the single-family housing market will temper rent growth,” noted Mr. Havsy.

* Availability is space that is actively being marketed and available for tenant build-out within 12 months.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

Media contact

Robert McGrath
Senior Director, Global Media Relations
email

SOURCE: CBRE

CBRE: U.S. commercial real estate market continued to exhibit strong momentum in the second quarter of 2015

  • Office Vacancy Rate at Lowest Point since Q3 2008
  • ​Industrial and Retail Sectors See Continued Improvement in Availability Rates

Los Angeles, 2015-7-15 — /EPR Retail News/ — The U.S. commercial real estate market continued to exhibit strong momentum across all property types in the second quarter of 2015 (Q2 2015), according to the latest analysis from CBRE Group, Inc.

During Q2 2015:

  • The office vacancy rate dropped 40 basis points (bps) to 13.5%, now at lowest point since Q3 2008 (13.2%).
  • In Q2 2015, the industrial availability* rate dropped 30 bps to 9.8%—matching the cyclical low achieved in Q4 2007.
  • The retail availability rate dropped 10 bps, ending the quarter at 11.4%.
  • Demand for the nation’s apartment buildings continued to grow with vacancy dropping to 4.3% in Q2 2015.

“The strong progress in the commercial market matched the continued steady improvement in the economy,” said Jeffrey Havsy, Americas Chief Economist for CBRE. “We remain bullish for the second half of 2015 as economic growth is expected to accelerate after a sluggish start to the year.”

Office Market
Q2 2015 was the 21st consecutive quarter without an increase in office vacancy rates since the end of the Great Recession. The office vacancy rate reached its lowest point since Q3 2008. Vacancy dropped to 13.5% with a decline of 40 bps and improvement remained broad-based across the U.S. office markets. The South and West regions saw the greatest improvement over the past four quarters, with notably strong performance in San Jose, Nashville, San Francisco, Richmond, Orange County and Austin. The nation’s lowest vacancy rates in Q2 2015 were in San Francisco (6.7%), Austin (8%), Nashville (8.4%), Pittsburgh (9%) and New York (9.1%).

“The U.S. office market was able to withstand economic headwinds during the first quarter and came back stronger than anticipated in the second quarter,” noted Mr. Havsy. “Economic fundamentals are pointing to a sustained U.S. office expansion in 2015, as companies are hiring workers at a robust pace, and investment in commercial real estate continues to show a positive trend.”

Industrial Market

The industrial availability rate dropped 30 bps from Q1, to 9.8%. The U.S. industrial real estate market has now seen flat or declining availability rates for 21 consecutive quarters, the longest stretch since CBRE began tracking the national market in 1989.

Lower industrial availability rates were widespread in Q2 2015. Markets of all sizes and in all regions posted lower availability rates during the quarter, paced by large markets, including Atlanta (-40 bps), Chicago (-40 bps), Los Angeles (-50 bps) and Riverside (-80 bps).

“The commercial real estate market showed broad based strength in the second quarter with significant declines in industrial vacancy rates,” said Mr. Havsy. “The need for new space is greater than it has been in nearly a decade. We expect the economy to continue to grow, aided by many tailwinds benefiting the industrial market including increased consumer spending and e-commerce and the continued resurgence of U.S. manufacturing aided by low energy costs.”

Retail Market
During Q2 2015, the retail availability rate dropped 10 bps from Q1 2015, and 40 bps from a year earlier, ending the quarter at 11.4%.  The rate is now 190 bps below its post-recession peak of 13.3%, representing a slow but ongoing decline. The greatest declines were posted by Louisville (-80 bps), Seattle (-40 bps), Salt Lake City (-120 bps) and Jacksonville (-40 bps). San Francisco recorded the lowest availability rate in Q2 2015 at 5.4%.

“The retail sector continued its slow and steady progress toward recovery with another 10 bps drop. A tightening labor market and continued low energy prices are expected to further support U.S. consumers, allowing for increased discretionary spending as the year continues,” said Mr. Havsy.

Apartment Market
Preliminary data shows that apartment demand continued to be strong in Q2 2015, with the multifamily housing vacancy rate declining to 4.3%, a 30 bps drop from a year earlier. This drop provides further evidence that the rental market continues to tighten along with the expanding U.S. economy. The market is very tight and apartment demand remains strong as the vacancy rate pushes closer to its 20-year vacancy low of 3.1% (Q3 2006).

Compared to a year earlier vacancy rates declined in 43 of the 62 markets, while rising in 15 and staying the same in four. The following markets experienced the greatest year-over-year declines (of 80 bps or more): Salt Lake City, Memphis, Richmond, Jacksonville, Las Vegas, Atlanta, Phoenix, Fort Worth, Orlando and Indianapolis.  Among those posting Q1 vacancy rates of 3.5% or lower were Providence, Newark, Hartford, Salt Lake City, Minneapolis, Miami, San Jose, New York and Sacramento.

With occupancy remaining high by historical standards, effective rent growth is expected to stay strong well into 2015. Although construction places downward pressure on rents, the market is tight enough to absorb this activity.

* Availability is space that is actively being marketed and available for tenant build-out within 12 months.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue).  The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

For Further Information:

Robert Mcgrath
Director, Sr
T +1 212 9848267
email

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CBRE analysis: U.S. commercial real estate market showed continued strength in Q1 2015

  • Office Vacancy Continues to Decline
  • Industrial and Apartment Demand Strong

Los Angeles, 2015-4-13 — /EPR Retail News/ — The U.S. commercial real estate market showed continued strength across all property types in the first quarter of 2015 (Q1 2015), according to the latest analysis from CBRE Group, Inc.

  • The office vacancy rate* declined by 10 basis points (bps) from the previous quarter to 13.9% in Q1 2015. The office vacancy rate has fallen 100 bps over the past four quarters, and now sits at its lowest mark since 2008.
  • In Q1 2015, national industrial availability1 dropped 20 bps from Q4, to 10.1%—a full percentage point below the year-ago level.
  • Retail demand remained steady with the Q1 2015 availability of 11.5%, unchanged from the prior quarter.
  • Demand for the nation’s apartment buildings remained strong with vacancy of 4.5% in Q1 2015.

“Continued improvement in office vacancy will be dependent on the pace of hiring,” said Jeffrey Havsy, Americas Chief Economist for CBRE. “We believe March’s relatively weak job growth was a pause, but should that trend continue several markets with heavy construction activity could see a reversal in the recent trend toward lower vacancy.”

Office Market
Q1 2015 marked the 12th consecutive quarter of office vacancy rate declines. The trend remains broad-based across U.S. office markets. Vacancy fell in 41 of the 62 markets, rose in 18, and remained unchanged in three. Absorption of office space in the quarter was 9.5 million sq. ft.  Suburban markets drove the overall improvement with a decline of 20 bps to 15.4%. Performance in downtown markets was mixed; vacancy increases in several large metros pushed the downtown rate up 10 bps during the quarter, to 11.2%.

Newark, San Jose and Las Vegas recorded the largest quarterly declines in Q1 2015, each above 100 bps. Over the past year, markets in the South and West have seen the greatest improvement. Among these are Orange County, Austin, Salt Lake City, San Jose, Las Vegas and Raleigh. The nation’s lowest vacancy rates in Q1 were in San Francisco (7.1%), Austin (7.9%), Pittsburgh (9.2%) and New York (9.3%).

“Economic fundamentals point to a sustained U.S. expansion in 2015, with businesses more confident than they were earlier in the recovery cycle,” noted Mr. Havsy.”There remains pent-up demand in key segments such as housing and subdued inflation will allow the Federal Reserve to keep interest rates low for several more months, helping to support above-trend growth.”

Industrial Market
The industrial real estate recovery has now continued for 19 quarters, the longest uninterrupted stretch of declining availability since CBRE began tracking industrial market activity in 1980. The start of 2015 saw the vast majority of markets continue to improve—41 reported declines in availability, while four remained unchanged and 12 recorded increases.

Lower availability rates were widespread across markets of all sizes and in all regions. The recovery has been rolling long enough that fewer markets are now reporting dramatic drops in availability; the vast majority of Q1 2015’s declines were less than 50 basis points. In fact, “recovery” can be replaced with “expansion” for some markets; a handful have seen availability rates fall below prior cycle lows and rent growth exceed prior highs. Among the 10 largest markets, all but two declined; Dallas and Philadelphia reported slight increases (30 and 10 bps, respectively) during the quarter. Atlanta (-50 bps) and New York (-40 bps) led with the strongest declines.

In addition, Mr. Havsy noted that “industrial activity in Q1 doesn’t appear to have been impacted by the West Coast port slowdown. All the major ports in that region saw vacancy declines last quarter.”

Retail Market
Retail availability remained unchanged between Q4 2014 and Q1 2015. However, availability at year end 2014 was 50 bps below its year-earlier rate and is now 180 bps below the post-recession peak of 13.3%. 34 of the 62 markets tracked had availability decline in Q1 2015, while 28 recorded flat or increasing rates. Forty-three markets have improved upon their rates from one year ago.

Kansas City, Baltimore and Las Vegas were among those recording rising availability rates in Q1 2015. Availability rate declines of 50 bps or more from the previous quarter were recorded in Austin, Louisville and Trenton. The lowest availability rate recorded in Q1 2015 (5.5%) was in San Francisco, while the highest (16.8%) was in Trenton.

“Sluggish retail sales numbers continue to weigh heavily on the retail leasing market,” said Mr. Havsy. “Until personal income and retail sales rise at a faster pace, it is hard to see retail absorption increasing more rapidly.”

Apartment Market
Preliminary data shows that apartment demand continued to grow in Q1 2015, with the multifamily housing vacancy rate declining to 4.5%, a 40 bps drop from a year earlier. This represents a continuation of a persistent downward trend in national vacancy rates that began several years ago. The market is very tight and apartment demand remains strong as the vacancy rate pushes closer to its 20-year vacancy low of 3.7%.

Compared to a year earlier, vacancy rates declined in 51 of the 61 markets, while rising in seven and staying the same in three. The following 15 markets experienced the greatest year-over-year declines (of 80 bps or more): Memphis, Jacksonville, Greenville, Fort Worth, Indianapolis, Las Vegas, Fort Lauderdale, Orlando, Birmingham, San Antonio, Tampa, Atlanta, Phoenix, Chicago, and Houston.  Among those posting Q1 vacancy rates of 3% or lower were Portland, Newark, Minneapolis, Oakland, Miami, and Los Angeles.

With occupancy remaining high by historical standards, effective rent growth is expected to stay strong well into 2015, provided U.S. economic growth remains steady. Relatively high effective rent levels (exceeding pre-recession peaks in most major markets) have brought increased apartment construction starts in considerable numbers over the past year. Although construction places downward pressure on rents, the market is tight enough to absorb this activity—especially if demand growth keeps pace with economic growth.

*CBRE EA has transitioned to Census 2010 metropolitan area definitions. Under the new definitions, Edison is no longer classified as a market; its submarkets have been merged into New York and Newark. Historical data will differ from what was previously reported.

1 Availability is space that is actively being marketed and available for tenant build-out within 12 months.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue).  The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

For Further Information

Robert Mcgrath
T +1 212 9848267
email