Who's the Darling Now?

ORLANDO—Wondering what to make of the recent REIS Reports mid-year update? Fred Schmidt, president and COO of Coldwell Banker Commercial Real Estate, has some keen insights.

From a high level, Schmidt tells GlobeSt.com a quote from the Urban Land Institute's 2015 Commercial Real Estate Forecast is appropriate for summer up mid-year 2015: “Sustaining momentum but taking nothing for granted.” Based on the supply-demand preliminary reports from REIS, Schmidt is seeing that prediction manifest in numbers.

“The office sector remains unchanged at 16.6%, however vacancy compression has moved consistently downward for the past two years,” Schmidt says. “The demand for office space reflects the positive employment numbers we have seen during the past year. As a result rents are up 3% which is consistent with demand supply variables mentioned above.”

It's not a huge surprise, but the multifamily sector remains unchanged at 4.2%. Schmidt says that is reflective of new construction of multifamily units coming online, which is projected at 230,000 units through the end of 2015.

“Demand is driven by demographics in particular the Millennials who are moving into the stages of household formation and employment,” Schmidt says. “Rents are up 4% year over year, with the new supply coming online is expected that rents will continue to increase however the rate of increase will decrease.”

As Schmidt sees it, the multifamily sector remains very healthy and is still the darling of the investment community. Meanwhile, he reports, the retail market has experienced a slow steady decline with neighborhood and community centers at 10.1%, down 30 basis points year over year malls remain at 7.9%.

“This is the best performance since 2007,” Schmidt says. “Demand continues to be driven by the high-end and low-end retailers, the middle is the shaky ground. This sector has gone through the most market-driven change however it is slowly stabilizing.”