Commercial vacancy rates for the four core property types increased significantly in the second quarter. The industrial market ended the quarter with 10.7 percent of its space empty, an eye-popping 120 basis-point increase in a single quarter. This was by far the largest quarterly gain since 1986 when Grubb & Ellis began tracking national market data. The office vacancy rate moved higher by 100 basis points to end the quarter at 16.6 percent. Both property types could be on track to exceed their peaks of the early 1990s. Retail and apartment vacancy rates also increased but at a more modest pace. Look for leasing market conditions to bottom out late next year or the first half of 2011, followed by a sluggish recovery. While the four core property types are expected to ride through this cycle together, the industrial market may be positioned slightly ahead of the pack; the industrial construction pipeline empties out more quickly due to the shorter construction times, while a pick-up in global trade led by emerging markets could help support demand for light manufacturing and distribution space.
Source: Reis, Grubb & Ellis
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