Commercial Real Estate is Strong Nationwide

Just how hot is the commercial real estate market in Florida? It’s been attracting companies from across the country. According to a pair of recent economic reports, this success is a trend around the country.

Projections for commercial real estate in 2006 appear strong. The “Real Estate Industry Outlook” by PNC Financial Group Senior Vice President Nick Buss and the “Commercial Real Estate Outlook” of the National Association of Realtors both anticipate a good year for commercial real estate, driven primarily by job growth and international trade.

Both Mr. Buss and the national association expect average vacancy rates nationwide to drop and rents to rise in all five of commercial real estate’s major categories:

1. Retail
2. Office space
3. Industrial
4. Multifamily
5. Hotels.

The National Association of Realtors report noted that investors poured a record $268 billion into commercial real estate last year, up 44 percent from 2004.

“Investors’ love affair with real estate is still very much alive, but the risk is that that, too, can quickly change,” Mr. Buss said.

The multifamily housing and retail sectors are at greatest risk: multifamily because for the past year the supply of rental units was diminished by a wave of condominium conversions, which may not continue; and retail because consumers may cut back on their spending, much of which has been fueled by home equity loans that are becoming less attractive as interest rates rise.