Foreign buyers are focused on retail strip centers in Southern California, Chicago, the Northeast and the Southeast, according to NAR. (Photo: iStockphoto.com/sjlocke).
“Although the supply-demand fundamentals are broadly favorable in most commercial real estate markets, vacancy rates are rising modestly and rent gains are slowing,” says Lawrence Yun, NAR chief economist. “Slow economic growth is lowering the demand for commercial space, mostly in the office and industrial sectors.”
Tight credit availability has significantly slowed the volume of commercial real estate transactions, says Patricia Nooney, chair of the Realtors commercial alliance committee.
Vacancy rates in the retail sector will probably edge up to 9.3% in the fourth quarter from 9.2% in the fourth quarter of 2007. Average retail rent is expected to rise 1.3% in 2008, compared with a 2.9% gain last year. Retail transaction volume during the first four months of 2008 totaled $7.5 billion, significantly below the $27.7 billion in the same period last year. Strip center transaction volume is down 77% from a year ago.
Investment in commercial real estate during the first four months of 2008 was $48.2 billion, down 69.5% from $157.8 billion during the same period in 2007 when the credit markets were functioning normally (those totals do not include transactions valued at less than $5 million or investments in the hospitality sector), NAR reports.
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