Commercial Real Estate Market Trends and Outlook | www.nar.realtor.
This quarterly report combines and replaces the Commercial Real Estate Market Survey and the Commercial Real Estate Outlook. If focuses on commercial transactions of REALTORS® and affiliate members, and opportunities and challenges facing commercial practitioners.
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The Commercial Real Estate Trends & Outlook Report discusses trends in the small
commercial market (transactions that are typically less than $2.5 million) based on a
survey of members of the National Association of Realtors® engaged in commercial
real estate about their transactions in the second quarter of 2020.
Across the multifamily, industrial, office, retail, and hotel sectors, REALTORS®
reported a decline in sales and leasing transactions, a decline in sales prices, and an
increase in vacancy rates, with retail and hotel suffering the heaviest blow from the
coronavirus pandemic. Industrial and multifamily remain as the strongest legs of the
commercial real estate market, in both transactions for structures and land. The
office market is also impacted, but it is in the middle-of-the-pack in terms of the
impact. Commercial sales among REALTORS® fell 5% year-over-year in in 2020 Q2.
Sales prices were also down by 3%. Leasing volume fell by 4% , and construction was
down 5%.
Looking ahead in the next quarter, leasing volume in multifamily properties will likely
remain unchanged or decline modestly in 2020 Q3 compared to the volume in the
second quarter. Realtors® expect multifamily vacancy rates to hover at around 8%
in the next three months. In metro areas where rental vacancy rates are low, rents
will remain firm. In the office market, sales, leasing, and net absorption will likely
contract mildly in 2020 Q3 given the massive loss in occupancy that has already
occurred in the second quarter. Realtors® expect vacancy rates to continue to hover
at 15% and will remain elevated until employment gets back to the pre-pandemic
level. The industrial market is arguably the strongest leg of the commercial real
estate market, and Industrial properties will remain in demand given the constant
growth in e-commerce and as physical retail locations continue to attract and retain
consumers via online shopping and delivery. REALTORS® expect vacancy rates in
the warehouse spaces to average 8% in the coming quarter. Retail, after nearly
coming to a complete stop, is starting to show signs of recovering, but some
restrictions put in place to minimize human contact (i.e. operating at only 25%) will
keep vacancy rates elevated. REALTORS® expect vacancy rates to remain elevated
in the third quarter, at 20% among retail strip centers and free-standing stores, with
much higher vacancy rates for malls, at 35%.
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Posted by: Commercial Appraiser CRE BLOG, 310.337.1973 | September 10, 2020 at 04:41 PM