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CRE Demand Staying Strong

This is a great little article from summarizing a NAREIT (National Association of REITs) article on the strong demand for Commercial Real Estate assets. Even in the face of some rising rates and potentially slowing economy, interest is staying robust - even for retail, where construction has slowed and demand for space is absorbing vacancies.

From the article:

WASHINGTON, DC—A voracious appetite for commercial real estate demonstrates no signs of lessening as demand exceeded supply growth for retail, apartments and office markets, and was matched in industrial space.

According to market commentary from NAREIT, vacancy rates declined in office and retail markets, slightly changed in industrial, and had a small seasonal uptick within the multifamily sector. Rent growth decelerated, however, for office, retail and industrial properties while apartment rents continue to accelerate.

Industrial property markets had supply and demand roughly balanced, at high levels, as steady increases in e-commerce sales drive the demand for logistics facilities to ship goods purchased online. ...

With the slower construction of new retail properties, according to the report, demand growth outpaced new construction by a wide margin. Retail stores are struggling to keep up with competition from online stores and so there has been a shift in the type of tenants in the malls including more boutiques and sporting goods stores. Malls typically have a fairly high occupancy rate, however, because “people are still strolling in the malls, trying on clothes and shoes while enjoying the experience. Mall operators also entice customers with experiential events making it a destination. All in all, retail REITs are dealing with retail challenges but they are still doing fairly well,” says Schnure.

Office markets saw a slight slowing in net absorption, to 18.3 million square feet, from 20.5 million square feet in Q3, according to the report. However demand growth in the second half of the year accelerated from the quarterly average of 14.3 million square feet in the first half of the year, and demand exceeded supply growth in Q4 by 2-to-1. Some of the main reasons for the surge is the economy’s steady job growth numbers and the office-sharing phenomenon.

Full Article Here:

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