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US Commercial Real Estate Market Weakness Continues - NAR

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By Michael R. Crittenden
Of DOW JONES NEWSWIRES


WASHINGTON (Dow Jones)--The U.S. commercial real estate market is likely to stay weak into 2010, with any recovery unlikely until at least the second half of next year, the National Association of Realtors said Wednesday.

The group said its Commercial Leading Indicator for Brokerage Activity fell to a 15-year low in the second quarter as continued high unemployment, falling industrial production and broader economic difficulties continued to weigh on the commercial real estate market.

"Any meaningful recovery is not likely to occur before the second half of next year," NAR chief economist Lawrence Yun said in a statement released by the group.

The group forecasts that vacancy rates in the office, industrial and retail sectors will continue to climb in 2010, while rent levels are expected to fall. Any recovery in the commercial market will hinge on when the economy begins to turn around in earnest, Yun said.

"The office sector requires job growth to fuel the demand for additional space, the industrial sector needs a rise in production and the retail sector is tied to consumer spending," he said.

A separate survey by the Society of Industrial and Office Realtors came to a similar conclusion. NAR said in a release that the SIOR Commercial Real Estate Index declined for the 10th consecutive quarter, with respondents seeing sizable rental discounts and sale prices that are lower than replacement costs.

"Properties with positive cash flow have had trouble finding financing to roll over debt, transactions are essentially at a standstill and new development is virtually nonexistent in most areas," said Robert Toothaker, chairman of the Realtors Commercial Alliance Committee.