Rocky Road Ahead for Commercial Sector

Still, commercial markets will overcome economic slowdown and terrorist attacks.

December 1, 2001

Residential and commercial real estate markets, which had started to retreat from soaring highs in the second half of 2001, were nudged down by the Sept. 11 terrorist attacks. But the prospects for 2002 look surprisingly good—for reasons that are anything but surprising.

Here you'll find forecasts as well as vacancy rates for four commercial sectors--office, warehouse, retail, multifamily--as reported in late October 2001.

Office Market

Look for office vacancies to move up to about 13 percent by the third quarter of 2002, then head back down in the fourth quarter to between 12.5 percent and 12.9 percent, NATIONAL ASSOCIATION OF REALTORS®' analysts say.

Metro area Vacancy rate (%)
Austin, Texas 4
Washington, D.C. 4.2
Boston 4.4
San Jose, Calif. 5.2
Seattle 5.2
San Francisco 6
San Diego 6.3
New York 7
Portland, Ore. 7.9
Raleigh, N.C. 8

Warehouse Market

With inventories getting tight and consumer spending staying moderate, analysts are expecting to see a pick up in manufacturing production. Look for available space to stabilize at between 8.5 percent and 8.7 percent through 2002, NAR analysts say.

Metro area Vacancy rate (%)
San Francisco 3
Los Angeles 4
Oklahoma City 4.1
San Jose, Calif. 4.2
Milwaukee 4.3
Jacksonville, Fla. 4.6
Kansas City, Mo. 4.9
Seattle 4.9
Orange County, Calif. 4.9
Palm Beach County, Fla. 4.9

Retail Market

Retail vacancies are expected to hit 11.6 percent by the end of 2002, then start coming back down, NAR analysts predict. Joblessness is growing, but it won’t affect retailers that deal in basic staples and everyday items, such as grocery stores, discounters, and drug stores,” says Cynthia Shelton, CCIM, vice president of Commercial Net Lease Realty, Orlando, Fla. “High-end retailers will also do OK. The lag will come in the middle category. We’re already seeing reduction by such retailers as Home Depot in the size or the number of stores.”

Metro area Vacancy rate (%)
San Jose, Calif. 4
San Francisco 4.1
Phoenix 4.4
Seattle 5
Austin, Texas 6
Raleigh, N.C. 6
Denver 6
East Bay, Calif. 6
New York 6
Salt Lake City 6

Multifamily Market

The multifamily sector could be the one beneficiary of further economic weakening or more terrorist attacks. In either case, dampened consumer confidence could keep renters from buying. Look for apartment vacancies to level out at about 5.8 percent by the close of 2002, remaining near historic lows.

Metro area Vacancy rate (%)
Minneapolis 1.5
Orange County, Calif. 2.1
Chicago 2.2
San Diego 2.2
San Jose, Calif. 2.4
Boston 2.5
San Francisco 2.5
East Bay, Calif. 2.6
Northern New Jersey 2.9
Austin, Texas 3.1

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.