Interesting Times

By Bloomberg, 7-17-10 

The commercial real estate market is showing signs of improvement, according to a report issued Friday by Moody's Investors Services.

The firm's review of U.S. market trends in the second quarter shows the inventory of new commercial properties shrank, which should help balance out supply and demand for real estate in the sector.

In addition, demand is on the upswing and growth in vacancy rates should begin to flatten and possibly contract going forward, said Moody's senior analyst Keith Banhazl.

By metropolitan area, the best five commercial real estate markets in the second quarter were Honolulu, New York, Los Angeles, Boston and San Francisco, Moody's said.

The five worst-performing markets were Hartford, Conn., Trenton, N.J., Detroit, Tampa, Fla., and Phoenix.

Moody's tracks commercial real estate trends in office, retail, apartment and industrial segments.

Its latest review found U.S. apartment properties saw vacancy rates drop from 7.4 percent to 6.5 percent.

The vacancy rate for retail properties was essentially flat, rising to 12.8 percent from 12.4 percent.

Office property landlords in central business districts continued to see demand improve in the second quarter, but overall it was still outpaced by the supply of available properties. The segment's vacancy rate, however, rose for the sixth consecutive quarter to 12.9 percent from 12.5 percent.

The industrial property segment also saw its vacancy rate inch higher to 14 percent from 13.9 percent.