The economy closed 2012 with positive growth, the slow fourth quarter GDP data notwithstanding. Mirroring that growth, commercial real estate also notched a year of growth and expansion. Fundamentals continued improving through the fourth quarter of the year, with declining vacancies and rising rents. The apartment sector shone brightly, and office and industrial spaces also found favorable conditions. With a strengthening foundation, investment sales found a higher ledge on their climb from the depths of the 2008-09 Great Recession.
With employment in office-centered industries rising, demand for office buildings advanced. For office properties, net absorption totaled 17.4 million square feet in 2012, according to Reis, Inc. The supply of new office space ramped up, but did not match demand—there were about 12.0 million square feet of new completions. Vacancy rates for office properties are expected to hit 16.0 percent by the end of the first quarter of 2013 and to continue declining to an average 15.9 percent for the year. The decline in vacancies is expected to be accompanied by a 2.6 percent rise in rents.
For more information about the 2013 commercial real estate outlook, see the Expectations & Market Realities in Real Estate 2013 report.