Demand for office space and warehouse space is expected to riseas the employment picture brightens, but that won't happen in anymeasurable degree until next year, according to NAR chief economistLawrence Yun.

"Because of the lingering impact from the deep recession over the pasttwo years, vacancy rates will trend higher and many commercialproperty owners will need to make rent concessions," he said.Commercial vacancy rates are expected to remain high in office,industrial and retail, according to NAR's latest Commercial RealEstate Outlook. The one bright spot, not surprisingly, is multifamily.Vacancy rates in the office sector are forecast to rise from 16.3% inthe fourth quarter of 2009 to 17.6% in the fourth quarter of thisyear; the longer term outlook is for vacancies to average 17.4% in2011. In 57 markets tracked, net absorption of office space is expected tobe a negative 27.3 million square feet in 2010.

Obsolescence is a factor in the industrial space as well, albeit notto the extent that it is with office. Vacancy rates will probably risefrom 13.9% in the fourth quarter of last year to 14.9% in the closingquarter of 2010, NAR says; next year they could average 14.5% .Retail vacancy rates are expected to rise from 12.4% in the fourthquarter of 2009 to 12.7% in the same period of this year, and may holdat that level in 2011. Net absorption of retail space in 53 tracked markets should be anegative 3.4 million square feet this year.

The apartment rental market, poised to gain from a rise in householdformation, is the exception. Multifamily vacancy rates are likely todecline from 7.4% in the fourth quarter of last year to 6.6% in thefourth quarter of 2010, and possibly edge down to 6.1% next year.Multifamily net absorption is expected to be 115,000 units in 59tracked metro areas this year