As 2012 gets underway, there are numerous signs that commercial real estate markets – along with the economy – are making slow but steady recoveries. While the current climate hardly resembles the boom days of 2005 and 2006, there is finally good reason to believe we are on the right track. Below are four recently released stats indicating the industry’s continuing comeback:
• The Architecture Billings Index, compiled each month by the American Institute of Architects (AIA), was 52 in December, marking the second straight month the index demonstrated growing demand for design services. Any score above 50 reflects an increase in architectural billings.
The index also was 52 in November.
While noting the Index demonstrated increasing demand in late 2010 –only to fall below the 50 mark for much of last year – AIA Chief Economist Kermit Baker said in a statement the recent scores are “very good news for the design and construction industry, and it’s entirely possible conditions will slowly continue to improve as the year progresses.”
• The National Retail Federation (NRF) says retail sales will increase by 3.4 percent – to $2.53 trillion – in 2012. While that’s lower than the 4.7 percent growth of 2011, “the retail industry will still grow at a rate faster than many other industries,” NRF said, noting economists typically are projecting the real U.S. gross domestic product to rise by 2.1 to 2.4 percent.
• The CoStar National Composite Index, which measures commercial real estate sale prices, increased for the seventh consecutive month in November 2011, when it rose by 0.6 percent when compared to the preceding month. CoStar attributed the growth to the “continued decline in the number of distressed property sales, and solid price gains in investment-grade property sales.”
In November, prices for commercial properties were an average of 1.8 percent higher than they were in the same month in 2010.
• The U.S. office market absorbed 50.4 million square feet in 2011, up from the 18.7 million square feet it absorbed one year earlier, according to a new Cassidy Turley report. Sixty-five of the 80 metropolitan areas tracked by the firm experienced positive absorption in 2011; in 2010, only 43 of the markets did.
The national office vacancy rate has declined for the past five quarters, but it is still 200 basis points above the 20-year historical average of 14 percent. “The U.S. office sector is still a solid 12 months away from registering consistent upward movement in rents across the country,” said Kevin Thorpe, chief economist for Cassidy Turley, in a statement. “In most metro areas, vacancy is at least 200 basis points above where it needs to be to trigger sustainable rent growth.”