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Working Papers

State of the Commercial Real Estate Markets

Working paper #698
Kenneth T. Rosen

The commercial real estate markets are slowly beginning the recovery process. The general trend should continue on an upward trajectory. In the near term, the demand recovery will continue as job growth accelerates. Achievable rental rates will appreciate at a measured pace and it is unlikely that there will be a significant rent spike, with the exception of rental apartments, until much of the vacant space is absorbed. The slow recovery in tenant demand will constrain construction activity for at least the next two years, again with the exception of a likely surge in new apartment construction. A strong investor preference for core assets in gateway markets should continue as risk appetites adjust, though secondary markets and slightly riskier strategies will increase as investors seek higher yield opportunities.

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