X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

WASHINGTON, DC-There has been little shortage of bad news for the commercial real estate industry to absorb; the data dump was delivered Thursday by three of the leading industry indices: the National Association of Realtors’ Commercial Leading Indicator for Brokerage Activity, the Society of Industrial and Office Realtors’ Commercial Real Estate Index and AIA’s Architecture Billings Index. To be fair, the ABI does represent a bright spot for the industry: after an eight-point jump in March, it only fell less than a full point in April. Despite that, the bottom line for the remainder of 2009 is looking bleak, NAR economic Lawrence Yun tells GlobeSt.com.”The commercial real estate markets are not going to see a return to normalcy until the middle of next year,” he says. That said, Yun adds he is heartened by the Federal Reserve Bank’s recent decisions to expand TALF to include five-year and vintage CMBS. “The Federal Reserve needs to be very aggressive in liquefying the CRE mortgages out there.”

Indeed, the severe credit crunch is the key driver behind the dismal results in the latest NAR Commercial Leading Indicator for Brokerage Activity. It fell 4.8% to an index of 103.5 in Q1, from a downwardly revised reading of 108.7 in Q4. It is now 12.9% below the 118.8 recorded in the first quarter of 2008. Because it is a forward-looking metric, the index points to a decline in net absorption and completion of new commercial buildings over the next six to nine months.

Office vacancy rates are projected to increase to 16.1% in 2009 from 13.4% last year, and rise to 20.4% in 2010. Annual rent is forecast to fall 7.2% this year and 0.8% in 2010 after a 0.4% decline last year.

Vacancy rates in the industrial sector are estimated to rise to 11.9% in 2009 and 12.6% next year, compared with 10.4% in 2008. Annual rent is likely to fall 3.4% this year and 4% in 2010, after declining 0.8% in 2008.

The retail vacancy rate will probably rise to 12.1% this year, NAR goes on to report, and 15.8% in 2010 from 9.7% in 2008. Average retail rent is expected to fall 2.1% in 2009 and 1.5% next year; it declined 2% in 2008.

Finally, multifamily vacancy rates are forecast to rise to 6.8% in 2009 and 6.7% next year from 5.7% in 2008. Average rent should grow 1.5% this year and 2.5% in 2010, following a 2.9% gain in 2008.

The SIOR Commercial Real Estate Index, a separate attitudinal survey of more than 600 local market experts, also point to a lower level of business activity in upcoming quarters. The SIOR index has declined for nine straight quarters and stood at 42.3 in the first quarter, well below the 100 point criteria that represents a balanced marketplace.

Then there is the Architecture Billings Index, which after an eight-point jump in March, fell less than a full point in April. A leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.

In April the ABI rating was 42.8, down from the 43.7 mark in March. This was the first time since August and September 2008 that the index was above 40 for consecutive months; still, though, any score under 50 represents an overall decline in demand for design services.

More good news: the new projects inquiry score was 56.8–the second month with very strong inquiries for new projects. A growing number of architecture firms report potential projects arising from federal stimulus funds, says AIA Chief Economist Kermit Baker in a prepared statement. What these figures mean is that we could be seeing things turn around over a period of several months, he concludes.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt. APARTMENTS SPRING 2021Event

Join 1000+ of the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!

Get More Information
 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.