The CRE Recovery Continues
7/6/11 - CoStar Group - Mark Heschmeyer
Commercial real estate fundamentals continued to strengthen in the second quarter of 2011 at an evermore moderate pace than the end of last year. The controlled recovery has been consistent with global economic trends, which softened in the first half of the year as a result of the devastating earthquake in Japan.
While the economy continues to face a number of challenges, office market growth is to be expected in the second half of this year. As energy prices ease, and the global supply chain is restored, the cyclical nature of the economy will gather momentum and in turn accelerate the recovery of CRE.
The office market posted its fifth consecutive quarter of positive net absorption while speculative space under construction reached more than 9.8 million square feet,” noted Chris Macke, senior real estate strategist for CoStar Group, in analyzing preliminary numbers.
The retail real estate recovery also continues to push forward, but retailers have reduced their rate of expansion as net absorption has slowed to its lowest level since the first quarter of 2010. CoStar Group economist Ryan McCullough in response to the reported two-year average net absorption rate at 12.4 million square feet – well below the reported 26.5 million in the fourth quarter - stated “this slowdown should be no more than a temporary slump; an economic uptick in the second half of the year should be enough to stimulate retail sales and encourage retailers to become more aggressive with expansion plans.”
With the industrial market slightly held back from the others, gradual improvements have been made. CoStar economist Shaw Lupton stated “ultimately, economic expansion will result in a quickening of warehouse absorption… but should remain low relative to historical data until warehouse rents grow significantly next year, providing developers with the green light to build.”
To learn more about the current status of CRE industry or view full second quarter reports visit CoStar Group.
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