Cassidy Turley recently released its Third Quarter 2013 Market Reports. They show continued improvement in both the Office and Industrial commercial real estate sectors. Here are some highlights from the reports:
The reports suggest that the economy continues to improve. However, it is important to note that the writers intentionally set aside the government shutdown as the impact it will have on the overall U.S. economy is not yet known. If an agreement comes soon the debt ceiling issues can be avoided and the impact may be minimal. If it does not and the nation defaults then the impact could be catastrophic. So shutdown aside, the reports show that consumer spending is on the rise as retail sales are expected to increase by approximately 5% this year. Gross Domestic Product is growing at about a 2% rate. Finally, jobs are still being created nationally, although at a slower rate than we saw in the first half of 2013.
The United States office market has now seen positive absorption for 13 straight quarters. This means that for the last four years running more office space has become occupied by tenants than is being vacated. In the third quarter of 2013 alone, businesses across the country absorbed a total of 13.3 million square feet. Despite the eight million square feet of new office space that was delivered to the market, construction activity is still below pre-recession levels. The report states that the combination of positive absorption with limited amount of new office buildings being delivered to the market led to falling vacancies in 70% of office markets in the United States. (In Cincinnati, the vacancy rate fell 0.2% between the second and third quarters.) The U.S. office market vacancy rate is now 15.2%, which represents a decline of 2% from recessionary highs. The average asking rental rate also saw nearly 1% growth nationally. It now stands at $21.91 per square foot.
According to the Third Quarter U.S. Industrial Report, demand for industrial space is skyrocketing throughout the country. The market has seen six straight quarters of over 20 million square feet of vacant space being absorbed. 30.4 million square feet alone was absorbed in the third quarter. (Cincinnati was tied for the market with the third most quarterly positive absorption at approximately 1.7 million square feet.) The increasing level of demand is driving vacancies down. The national vacancy rate is 8.3%. (Cincinnati’s is 6.7%.) Increased demand along with lack of available supply is driving new construction activity. In fact, new construction in up 33% over 2012. The average asking rental rate for industrial space in the United States is $5.11 per square foot. This is $0.04 higher than a year ago.
To read the full Third Quarter Office and Industrial Market Reports click here