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Steady Growth Expected for Commercial Real Estate in 2017

Commercial Mortgage
Posted on 
February 20, 2017

The commercial real estate market will likely experience steady growth in 2017, according to the National Association of Realtors (NAR).

According to the data, office vacancy rates are expected to fall by 1.1% t0 12.1% nationwide because of job growth and the need for additional office space. Vacancy rates for industrial spaces are expected to decrease by 1.3% to 7.1%, while rent availability is expected to drop by 0.7% to 11.2%.

“Last year was the 11th year in a row of subpar GDP growth, but renewed corporate optimism leading to a focus on investment and a desperately needed boost in residential construction should pave the way for modest expansion this year of around 2.4%,” according to Lawrence Yun, NAR chief economist. “Steady hiring and low local unemployment levels are finally supporting higher wages and increased spending, which in turn bodes well for sustained demand for all commercial property types.”

Additionally, NAR’s most recent Business Creation Index, which monitors local economic conditions from the perspective of NAR’s commercial members, pointed to a positive trend for smaller commercial businesses because of more business openings and fewer closings over the past year in their markets.

According to Yun, a more tax-friendly business environment and changes to 1031 exchanges could lead to a quickening of economic growth and allow for stronger commercial market fundamentals.

“The positive direction for commercial real estate this year will be guided by the steadily expanding U.S. economy, which has legs to grow and continues to be one of the top economic performers and safest bets in the world,” said Yun.

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