WASHINGTON, DC-Fundamentals in the commercial real estateindustry are forecasted to improve next year, according to theNational Association of Realtors and the Society of Industrial andOffice Realtors. In the meantime, firms with deep pockets, or atleast access to capital, are taking advantage of the currentenvironment to expand, says Lawrence Yun, NAR chief economist."Vacancy rates are beginning to level off in some sectors, but rentdiscounts and moderate levels of landlord concessions arewidespread," he said. "This is very much a tenant's market, whichis quite favorable for businesses that are consideringexpansion.“

Perhaps more encouraging for the rest of the industry is themodest improvement in the sentiment of commercial real estatepractitioners, as tracked by the SIOR Commercial Real Estate Index,which measures 10 variables every quarter in an attitudinal surveyof more than 600 local market experts. The most recent index,for Q2, rose 2.8 percentage points to 41. True, it remains below100, the measure that represents a balanced marketplace, however,this is the third consecutive quarterly improvement after nearlythree years of decline. In short, the last time the commercialmarket posted a score of 100 was in the third quarter of 2007.According to the survey, 57% of respondents expect improvements inthe office and industrial sectors in the third quarter.

NAR’s latest Commercial Real Estate Outlook, meanwhile, suggeststhat while vacancy rates in the office sector will continue toincrease this year, reaching 17% in Q2 2011, they will begin toease off later that year. Industrial vacancy rates should farea little better, with NAR projecting they will decline from 14.1%now to 13.7% in Q2 of 2011, and then continue to ease modestly asthe year progresses. Retail vacancy rates are expected to remain at13.1% for most of next year.