{"id":1004045503,"date":"2012-08-03T06:30:30","date_gmt":"2012-08-03T14:30:30","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004043842"},"modified":"2022-12-08T17:49:23","modified_gmt":"2022-12-09T01:49:23","slug":"cassidy-turley-cre-recovery-a-tale-of-two-markets","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/cassidy-turley-cre-recovery-a-tale-of-two-markets\/","title":{"rendered":"Cassidy Turley: CRE Recovery a Tale of Two Markets"},"content":{"rendered":"
By Gail Kalinoski, Contributing Editor<\/address>\n
\"\"<\/a>

Kevin Thorpe<\/p><\/div>\n

In a year where the U.S. economy remains \u201cstuck in a slow growth gear,\u201d commercial real estate recovery is uneven and there are very clear winners and losers, according to Cassidy Turley chief economist Kevin Thorpe.<\/p>\n

The winners are multi-family, and any sector with well-located Class A space. The losers are pretty much everything else.<\/p>\n

\u201cIt\u2019s very much a tale of two markets in that way,\u201d Thorpe told Commercial Property Executive <\/em>during a discussion of the Cassidy Turley U.S. Macro Forecast released this week.<\/p>\n

Even with several CRE bright spots, the overall economic forecast is not positive and Thorpe expects businesses and consumers to continue to be on the defensive for the rest of the year, particularly as we await the outcome of the presidential election and the continuing problems in Europe.<\/p>\n

\u201cIt\u2019s a scared economy right now. Scared to spend. Scared to sign a big lease. Scared to do anything that has a big risk,\u201d Thorpe said. \u201cUntil we get to 2013, risk aversion will probably be the dominant theme.\u201d<\/p>\n

But Thorpe notes that fear can also create opportunities.<\/p>\n

\u201cFear of the worst-case scenario playing out will keep many real estate investors on the sidelines during 2012,\u201d he said. \u201cFor the moment, a sizeable group of potential buyers have been removed, creating enormous opportunities for the bold.\u201d<\/p>\n

The opportunities, not surprisingly, continue to be in multi-family, which Thorpe called the strongest sector in commercial real estate.<\/p>\n

\u201cWe\u2019ve had eight or nine straight quarters of consistent demand outpacing supply,\u201d he said. \u201cVacancy has come down pretty significantly.\u201d<\/p>\n

Thorpe\u2019s report noted that apartment vacancy rates have steadily dropped from 5.6 percent in the third quarter of 2011 to 4.7 percent in 2Q 2012. He said there would be some upward pressure on rent through next year. Average rents were $1,070 in the first quarter of this year and inched up to $1,081 by the end of the second quarter. Thorpe is projecting rents to hit an average $1,083 by the third quarter, finish the year at $1,089 and start off 2013 at about $1,096.<\/p>\n

Thorpe said the industrial and warehouse markets have been another bright spot for CRE this year.<\/p>\n

\u201cThe industrial sector has been a big surprise in this economy,\u201d Thorpe said. \u201cThere has been an average of 20 million square feet of warehouse absorption per quarter since mid-2011 through the second quarter of this year. Those are very good numbers that we saw pre-recession.\u201d<\/p>\n

Thorpe said improvements in the manufacturing, auto, technology, health and data center sectors have contributed to the demand that was much better than anyone had expected. It has also led to some new construction. New delivery of industrial product more than doubled from 3.7 million square feet of space in the first quarter to 7.1 million square feet of space in the second, according to the report. Investment sales were also strong going from $5.8 billion in the first quarter to $8.4 billion by the second.<\/p>\n

\u201cOther than the multi-family sector, the industrial sector has the most spec development that we\u2019ve been seeing,\u201d Thorpe said.<\/p>\n

The news is not all bad for the office sector, particularly for owners of Class A office space in areas that have seen steady job growth like Houston and the San Francisco Bay area. But it is bad for lower-quality assets.<\/p>\n

\u201cClass B office vacancy rates still remain near recessionary highs, and Class C office product has posted only three quarters of positive demand over the past three years,\u201d Thorpe wrote in his report.<\/p>\n

Thorpe said the performance of Class A and lower-quality assets is even more pronounced in the retail market where Class A and downtown retail markets like San Francisco, Chicago, New York City and to some extent Washington, D.C., are doing very well and rents are rising. But travel outside those areas and you\u2019ll find retail centers that may take years to fill the space because there so much overbuilding, particularly between 2004 and 2007, he said.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

In a year where the U.S. economy remains \u201cstuck in a slow growth gear,\u201d commercial real estate recovery is uneven and there are very clear winners and losers, according to Cassidy Turley chief economist Kevin Thorpe.<\/p>\n","protected":false},"author":1335,"featured_media":1004043848,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21825,21748,21783,21742],"tags":[],"class_list":["post-1004045503","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","category-industrial","category-investment","category-latest"],"acf":[],"yoast_head":"\nCassidy Turley: CRE Recovery a Tale of Two Markets - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/cassidy-turley-cre-recovery-a-tale-of-two-markets\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Cassidy Turley: CRE Recovery a Tale of Two Markets\" \/>\n<meta property=\"og:description\" content=\"In a year where the U.S. economy remains \u201cstuck in a slow growth gear,\u201d commercial real estate recovery is uneven and there are very clear winners and losers, according to Cassidy Turley chief economist Kevin Thorpe.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/cassidy-turley-cre-recovery-a-tale-of-two-markets\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2012-08-03T14:30:30+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-09T01:49:23+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/07\/Lincoln-Center-300x168.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"300\" \/>\n\t<meta property=\"og:image:height\" content=\"168\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"michaelratliff\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/cassidy-turley-cre-recovery-a-tale-of-two-markets\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/cassidy-turley-cre-recovery-a-tale-of-two-markets\/\",\"name\":\"Cassidy Turley: CRE Recovery a Tale of Two Markets - 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