NAR Commercial’s Quarterly Market Survey for 4th quarter 2011 contains quite a few compelling data points. Illustrations of an improving market are mixed with more flat indicators, meaning the Great Recession has bottomed, yet struggles for growth remain. Some highlights:
Seven out of ten commercial REALTORS® completed a sales transaction 4Q 2011
The majority of our members did business last quarter. 46% of transactions came in at dollar amounts exceeding $500K with 28% of transactions $250,000 or lower, 26% between $250-$500K. The estimated average transaction rose from $1.1M to $1.2 M in the previous quarter. On the down side, sales volume declined 1% from this time a year ago, and sales prices declines 10% on a year-over-year basis.
Reductions and renewals in rental
Leasing activity rose 2% from 3Q 2011 while rental rates declined 4% from the same time. Office vacancy rates stood at 18.8% while average rental space demand (in office, industrial, retail, multifamily and hotel) for over-5,000 sq. ft. rose to nearly 30% of transactions, up from the mid-20s in 3Q.
Financing: Still very tight, banks not doing what they could
They may have been too big to fail in 2009, but banks are still failing the commercial real estate market today by helping to keep financing as the number one challenge to survey respondents for the second quarter in a row. Some respondents also reported that a surplus of bank-owned property is keeping prices low and causing a “chain reaction of short-sales” while banks “take an inordinate amount of time to make a decision”. (If only they had dragged their feet like this back when they all rushed to package and deal all those residential MBS…)
Cap rates: retail leads the pack
At 9.3%, retail property cap rates top the list, with development next at 9.2%, then multifamily at 8.9%, industrial at 8.7%, hotel at 8.6% and office at 8.2%.
New construction state leaders not population leaders
While inventory and vacancy rates are high, new construction (based on the overall level of commercial transactions or 4Q) is few and far between. The leading states show this: they’re not exactly a roll call of primary markets: Montana, Massachusetts, New Mexico and Maryland.
- Growth In Commercial Real Estate Markets Expected in 2012 (commercialsource.com)
- NAR’s Commercial Real Estate Market Survey Is Out (commercialsource.com)
- NAHB Indices for New and Existing Apartments Continue to Improve (eyeonhousing.wordpress.com)