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Second quarter CRE report paints rosy picture for investors

On Behalf of | Oct 5, 2017 | Commercial Real Estate |

Commercial real estate investors in California and around the country can expect returns to remain steady in the months ahead, according to a recent report from NAI Global. The brokerage firm made the prediction after studying industrial, office and retail vacancy rates and rents in 21 key markets. Based on the report, vacancy rates are already at or near 10- or 20-year lows. The resulting shortage of space has pushed rents higher in most parts of the country.

While office rents fell slightly during the second quarter, the NAI report puts this largely down to a noticeable downturn in rents in Chicago and New York. Office rents rose slightly in the other 19 markets studied, and vacancy rates were 9.6 percent for the third consecutive quarter. Net absorption also rose in the industrial sector despite falling in 12 of 21 markets, and rents inched up by 1.6 percent after increasing by 1.7 percent in the first quarter.

Industry experts have been making dire predictions about the retail sector for years, but the NAI report reveals that vacancy rates are holding steady while rents are actually increasing. Retail vacancies have stood at 4.8 percent, which approaches pre-recession lows, for three out of the last four quarters. Furthermore, rents rose by 1.8 percent, bucking the popular narrative that traditional brick-and-mortar retailing is moribund.

Low vacancy rates and rising rents are generally good news for commercial real estate investors and landlords. Completing developments on time and on budget usually involves overcoming a myriad of legal, zoning and regulatory issues. Attorneys with experience in this area may be able to help developers to identify and deal with problems before they become major obstacles.