IRVINE, CA—Auction.com Research, the market-research division of leading online real estate marketplace Auction.com, is cautious bullish on the commercial real estate sector as the first quarter of 2013 winds down. Predictions of continued growth for the rest of the year are included in its Quarterly Economic and Real Estate Update, which provides an overview of the domestic economy and capital markets, and looks at property conditions in each commercial sector.

“The US economy ended 2012 in the doldrums but started off 2013 on a more positive note,” said study author Peter Muoio, head of Auction.com Research. “Employment, household net worth, retail sales and business indicators are up and uncertainty has receded. Nevertheless, risks remain, with the potential impact of tax increases and federal spending cuts still uncertain.”

The report provides a “current state” of commercial real estate sectors – office, retail, warehouse, multifamily – and offers Auction.com Research's latest forecasts for each:

Office

Muoio pointed out that the national office market recovery has been slow, as demand remains tepid and while supply additions have been modest, they have impeded progress. Office absorption was positive for the eighth consecutive quarter at the end of 2012, measuring 3.9 million square feet. However, nearly 3.2 million square feet of completions prevented major declines in vacancies. The report forecasts that demand will gain traction over the next several years, while supply will remain modest.

Retail

The report asserts that the retail market is stalled and fundamentals were at their trough when 2012 ended. The reason, Muoio points out, is that retailers remain cautious as to the strength and continuity of the economic recovery. He expects that absorption will continue to gain momentum over the next few years, which will allow vacancies to fall to about 7.8 percent in 2016, allowing rents to rise slowly.

Multifamily

The report pointed out that the multifamily sector continued to show strong absorption through the end of the year. However, absorption is expected to level off.

Auction.com Research's updated apartment forecast highlights this shift in the supply-demand dynamic. While increased household formations will support absorption, strong rent growth will spur more development. As a result, Muoio predicted, vacancies will reach a trough of 3.7 percent in 2015 before rising 20 basis points in 2016. Robust rents will continue through 2016.

Warehouse

The warehouse market has seen a stronger vacancy recovery than the office and retail segments, though not as robust as the multifamily market. In 2012, industrial absorption measured over 96 million square feet, a significant improvement on 2011's total and thereby allowing easy absorption of the 28 million square feet of supply that was added. Vacancies finally reached a low enough level to drive a 1.7 percent increase in rent growth, the first calendar year of growth since 2007.

Auction.com Research will also provide ongoing analysis of major commercial sectors, as well as conditions in single-family housing. To learn more about Auction.com Research, visit http://auction.com/market-research.