Commercial Real Estate Recovery on Track

Despite the fits and starts and multiple global and domestic headwinds addressed in recent blogs, the economic recovery should continue this year and hopefully gain more momentum as bad news abates. A similar pattern exists for recovery of the nation’s commercial real estate market, only with different lag and lead times by property type.

The apartment market recovery continues to lead. Tenant demand picked up in mid 2009 and gained steam in 2010, resulting in the best absorption levels in over 15 years and well beyond a typical jobs-driven recovery. The vacancy rate fell from 8% as of year-end 2009 to 6.6% as of year-end 2010. Effective rental rates climbed by 2.4% in 2010 and are set to rise by at least 4.5% to 5% with many metros well above the national average.