C&W: Commercial Real Estate Recovery Uneven Across US
The national real estate market is in better shape than analysts anticipated given the largest employment declines in more than 70 years, but regional markets with the highest job losses, and the related overabundance of commercial properties vacant as businesses fail, will take longer to dig out of the recession, according to a report from Cushman & Wakefield (C&W). C&W, a real estate advising firm, said in its Economic Pulse report, that the recession did not hit all real estate markets equally. For instance, vacancy rates in Miami, one of the cities with largest job loss in the country, increased from 11.1% to 19.6% from the December 2007 national vacancy trough. Another unemployment heavy market, Phoenix, saw its vacancy rate increase from 14.6% to 23.4%. According to the US Department of Labor, Arizona has the 19th highest unemployment rate in the country at 9.6% in March, and Florida has the fifth highest rate at 12.3%. C&W reported these empty buildings will begin to fill eventually, but it will only be a modest recovery at first as businesses backfill existing space before increasing occupancy. “Nevertheless as employment rises, space will be absorbed off the market and vacancy rates will begin to decline. Those cities that experienced moderate employment declines have the best potential for growth,” according to the report. Employment isn’t the only factor though. The new supply of office space built before the current struggles in the commercial sector could also quell a speedy recovery, but according to C&W, construction did not surge at that time. Nationally, new completions of commercial real estate in 2009 represented only 1.3% of total inventory, compared to 3.2% in 2001. However, areas like Seattle are completing enough construction to increase its inventory by 10%, boosting its vacancy rate from 12.6% last year to 21.4% today. C&W did say on a national level, vacancy rates are below the last peak in 2003 and well below the level in of the early 1990s, suggesting a better emergence form the current recession than in those past. Write to Jon Prior.