Demand for office space and warehouse space is expected toriseas the employment picture brightens, but that won't happen inanymeasurable degree until next year, according to NAR chiefeconomistLawrence Yun.

"Because of the lingering impact from the deep recession overthe pasttwo years, vacancy rates will trend higher and manycommercialproperty owners will need to make rent concessions," hesaid.Commercial vacancy rates are expected to remain high inoffice,industrial and retail, according to NAR's latest CommercialRealEstate Outlook. The one bright spot, not surprisingly, ismultifamily.Vacancy rates in the office sector are forecast to risefrom 16.3% inthe fourth quarter of 2009 to 17.6% in the fourthquarter of thisyear; the longer term outlook is for vacancies toaverage 17.4% in2011. In 57 markets tracked, net absorption ofoffice space is expected tobe a negative 27.3 million square feetin 2010.

Obsolescence is a factor in the industrial space as well, albeitnotto the extent that it is with office. Vacancy rates willprobably risefrom 13.9% in the fourth quarter of last year to 14.9%in the closingquarter of 2010, NAR says; next year they couldaverage 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 thisyear, and may holdat that level in 2011. Net absorption of retailspace in 53 tracked markets should be anegative 3.4 million squarefeet this year.

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Erika Morphy

Erika Morphy has been writing about commercial real estate at for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.