FORECASTS
continued from page 12
Of the four major property categories,
Bach says that industrial and multifamily
will perform the best, followed by office
and retail. “In most of the country, the
housing downturn will be a net plus for
apartments because there would be
households forced or choosing to rent in
2008 and quite possibly 2009,” he maintains. However, he cautions that while
apartments are better sheltered from a
slowdown, they are “not insulated from
an outright recession.”
Even if the US goes into a recession,
industrial properties will see a short-term
demand spike as excess inventories will
need to be stored in warehouses, Bach
says. Office properties, meanwhile, could
struggle in the face of a slowdown in the
financial services industry, particularly in
New York City. “The financial services
slump is going to be focused on
Manhattan,” Bach observes.
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Likewise, the housing slump will
impact the retail sector, especially in outlying suburban regions where residential
projects have been halted, thereby undercutting the growth of retail developments
in those areas, Bach notes.
He envisions the strongest markets for
commercial real estate in ’08 will be in
the Pacific Northwest, particularly Seattle
and Portland, OR; the Bay Area; Los
Angeles County; Texas; the Rocky
Mountain States, notably Denver and
Salt Lake City; the Carolinas; and the
District of Columbia.
As for actual forecasted numbers,
Grubb predicts that office space takedown in 2008 will drop by nearly half
from 2007 to an estimated 36 million sf.
Some 55 million sf is expected to be
added to the US office stock, inflating
the amount of sublease space and sending the vacancy rate up 20 basis points
to 13.2%.
The industrial market will see net
absorption of 120 million sf in ’08, down
14% from last year. Vacancies will reach
7.8% by year-end, also up 20 basis points
from the previous year.
Those themes were echoed in the
“Commercial Real Estate Outlook,”
published by the National Association
of Realtors. Yet while the Washington,
DC-based organization expects office
and industrial vacancy rates to rise this
year due to excess supply, its prospects
for retail space and apartments are
upbeat.
“Vacancy rates in the retail and multifamily sectors area projected to tighten in 2008 with rents rising in all sectors,” states NAR chief economist
Lawrence Yun.
Despite a decline in consumer confidence, NAR foresees a fairly stable
retail marketplace, with vacancies
going from 8.9% in the fourth quarter
of 2007 to 8.6% by year-end. After rising an estimated 2.2% in ’07, retail rents
will inflate by only 1.9% in 2008. In 53
markets reviewed by NAR, 24. 7 million sf of retail space will be absorbed
during 2008, up from 18. 6 million sf in
’07 and 10. 5 million sf in 2006.
According to NAR, the multifamily
vacancy rate will decrease to 5.1% by
the end of this year from 5.4% in the
fourth quarter of 2007. Rents are anticipated rise by 3.8% this year, ahead of
the 3.1% climb in ’07. Net absorption of
multifamily residences is forecast to
total 245,800 units this year in 59
metro markets covered by NAR. That
is above the estimated 234,400 units
rented in 2007.—Maria Wood
