Nov. 5 (Bloomberg) -- Stores, apartment buildings and warehouses in the U.S. will set new vacancy records before a recovery takes hold in the job and commercial property markets, according to a forecast by CB Richard Ellis Group Inc.
Vacancies at industrial properties will climb to almost 16 percent in 2011 and apartment vacancies will top out at 8.1 percent this quarter, CBRE chief economist Ray Torto said in a presentation at the Urban Land Institute convention in San Francisco. The proportion of empty space at shopping centers and malls will increase to about 13 percent in 2010, he said.
U.S. commercial real estate prices have plunged almost 41 percent since October 2007, the Moody’s/REAL Commercial Property Price Indices show. The highest unemployment since 1983 has lowered demand for office and retail space and reduced consumer confidence and spending. Job cuts are also prompting tenants to move out of apartments.
“We don’t have a sustainable recovery yet,” Kenneth Rosen, a University of California economist, said in a panel discussion with Torto. “The problem is not supply, but how we get demand back.”
U.S. office vacancies are forecast to reach 18.6 percent in the first quarter of 2011, just shy of 1991’s 19.1 percent record, Torto said.
“Increasingly, investors are viewing office as a kind of non-core investment, which is a concern,” said Jonathan D. Miller, author of PricewaterhouseCoopers’s “Emerging Trends in Real Estate” report, released today. “Tenants come and go, and with these cyclical swings, it can be a troublesome investment if you don’t time it right.”
NYC Rents
New York City office rents have fallen as much as 50 percent, the fastest decline Vornado Realty Trust Chief Executive Officer Michael Fascitelli can recall.
“We’re in for a long haul,” he said, adding that he won’t consider buying assets until rents stop dropping.
Manhattan rents and occupancy rates should continue to decline through next year, said Miller, speaking to reporters on a webcast.
“Next year will be a rough year in the New York office market,” he said. Long-term, “New York is viewed as the place investors want to be.”
To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net.
Last Updated: November 5, 2009 16:27 EST
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