CRE occupier demand surpasses availability in RICS report
Occupier demand for commercial real estate surpassed rental space availability at the end of 2010, a sign that market conditions are improving for owners of CRE after several years of struggle. The Royal Institute of Chartered Surveyors released its Global Commercial Property Survey Friday, which found that consumer demand surpassed property availability likely because of an increase in capital value to market players. Prospects are looking positive on the investment side of the market, according to commentary released with the report. Many bankers and analysts nationwide reported positive market indicators in their markets, including more investor demand and higher occupancy rates. The RICS gathers information from interviews with its member, who are located globally. "There is certainly more occupier interest in properties this year, but this is being tempered by uncertainties regarding taxes, healthcare and the Middle East," said Simon Neame of Dallas. Neame is senior appraiser at Crosson Dannis, Inc. "Investor demand for good quality, well-leased properties remains solid." Jeff Greenwald, the founding stockholder and principal in the San Diego branch of Integra Realty Resources, said commercial development is underway, however, little construction is being geared toward new single-family residential spaces, low-income housing and multifamily properties. Most development is redevelopment, he said. Tampa is making strides to recovery, as commentators in the survey noted an uptick in transaction volume recently. Tampa "appears to be finding a bottom" they say. Other market players are less confident in their markets. For example, R. Jay Collins with First Citizens Bank and Trust expects economic downturn in Charleston, S.C. as early as next quarter. "Overall, the commercial market has remained stable over the past three months," Collins said. "However, continued high unemployment rates, decreasing occupancy rates and an increasing inventory of distressed properties indicate a downturn is possible for the next quarter." While investment in commercial real estate expected to soar this year, current trends could mean increased cost for consumers. A recent Harvard study found that elevated demand pressure coupled with fewer housing options is driving up rental prices and decreasing rental affordability. Two analysts from the Harvard University Joint Center for Housing Studies said that higher income bracket renters are now competing with low-income renters for the same properties, virtually eliminating affordable housing options. In addition, the largest portion of renters represents the lowest income bracket. The RICS Global Commercial Property Survey is a quarterly survey to identify investment and consumer trend in the market. The survey was sent to real estate organizations and filled between March 3 and March 31. RICS received 411 responses. Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.