National vacancy rates over the coming year are forecast to decline 0.2 percentage point in the office market, 0.6 point in industrial, and 0.6 point for retail; however, the average multifamily vacancy rate is unlikely to change, with that sector continuing to experience the tightest availability and biggest rent increases.
NAR’s latest Commercial Real Estate Outlook offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS, Inc., a source of commercial real estate performance information.
Office Markets Vacancy rates in the office sector are expected to decline from a projected 15.7 percent in the third quarter to 15.5 percent in the third quarter of 2014.
Markets with the lowest office vacancy rates presently (in the third quarter):
- Washington, D.C.: vacancy rate of 9.7%
- New York City: 9.8%
- Little Rock, Ark.: 12.1%
- Birmingham, Ala.: 12.4%
Industrial Markets Industrial vacancy rates are likely to fall from 9.3 percent in the third quarter of this year to 8.7 percent in the third quarter of 2014.
Areas with the lowest industrial vacancy rates:
- Orange County, Calif.: vacancy rate of 3.8%
- Los Angeles: 4%
- Miami: 5.9%
- Seattle: 6.4%
Retail Markets Retail vacancy rates are forecast to decline from 10.6 percent in the third quarter of this year to 10.0 percent in the third quarter of 2014.
Presently, markets with the lowest retail vacancy rates:
San Francisco: 3.9%
Fairfield County, Conn.: 4.1%
Long Island, N.Y.: 5%
Orange County, Calif.: 5.5%
Average retail rents should increase 1.5 percent in 2013 and 2.3 percent next year. Net absorption of retail space is projected at 11.8 million square feet in 2013 and 18.2 million next year.
Multifamily Markets The apartment rental market – multifamily housing – is likely to see vacancy rates edge up only 0.1 percentage point from 3.9 percent in the third quarter to 4.0 percent in the third quarter of 2014, with construction rising to meet increased demand. Generally, vacancy rates below 5 percent are considered a landlord’s market where demand justifies higher rent.
Areas with the lowest multifamily vacancy rates:
- New Haven, Conn.: 1.9%
- Syracuse, N.Y.: 2%
- New York City and San Diego: 2.1%
- Minneapolis: 2.2%