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NAR: Commercial Real Estate Price Growth to Weaken

Phil Hall
Sep 12, 2017
The next 12 months should see a flattening in commercial real estate price growth

The next 12 months should see a flattening in commercial real estate price growth, although leasing and investor demand should keep the sector steady, according to a new forecast from the National Association of Realtors (NAR).
Looking forward, NAR predicts national office vacancy rates to drop by 1.1 percent to 11.9 percent over the coming year. Among the sectors in this industry, the vacancy rate for industrial space is expected to decline 1.1 percent to 7.8 percent, while retail availability is to decrease 0.4 percent to 11.4 percent. The multifamily sector’s vacancy rate is predicted to drop from 6.6 percent to 6.1 percent.
“While inventory shortages are still driving prices higher in most markets, shrinking cap rates and the higher interest rate environment are expected to lead to a plateau in price growth over the next year, especially for Class A assets in large markets,” said NAR Chief Economist Lawrence Yun. “As a result, investors will continue to look to small and tertiary markets for properties that have the best opportunity to provide stability and generate solid returns.”  

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