WASHINGTON, DC-Fundamentals in the commercial real estate industry are forecasted to improve next year, according to the National Association of Realtors and the Society of Industrial and Office Realtors. In the meantime, firms with deep pockets, or at least access to capital, are taking advantage of the current environment to expand, says Lawrence Yun, NAR chief economist. "Vacancy rates are beginning to level off in some sectors, but rent discounts and moderate levels of landlord concessions are widespread," he said. "This is very much a tenant's market, which is quite favorable for businesses that are considering expansion.“

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

NAR’s latest Commercial Real Estate Outlook, meanwhile, suggests that while vacancy rates in the office sector will continue to increase this year, reaching 17% in Q2 2011, they will begin to ease off later that year. Industrial vacancy rates should fare a 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 as the year progresses. Retail vacancy rates are expected to remain at 13.1% for most of next year.

Vacancy rates in the apartment rental market, not surprisingly given the larger macroeconomic and housing trends right now, is likely to decline from its current 6% to 5.6% in Q2 of 2011.