Construction is inevitable in the commercial real estate industry. The Reis Report second quarter report for 2016 provides a wealth of information to commercial real estate developers, buyers and professionals. Reis provides data for the national commercial real estate market. It is one of the most valued sources for understanding CRE property and market information. Additionally, Reis covers eight sectors of commercial real estate. These sectors include: Flex/R&D, self storage, apartment, office, seniors housing, retail, student housing and warehouse/distribution. In the report, Senior Economist and Director of Research, Ryan Severino discusses office, apartment and retail segments in relation to CRE construction.
The Reis report on construction activity has determined that most CRE construction rates have remained stuck. The only sector that remains lucrative on the construction front is the apartment sector. Furthermore, apartment inventory for the first quarter of 2016 set record highs for construction completion. The second quarter’s totals were a bit higher than the first quarter. Lastly, the report mentions that the number of apartment units that have yet to be entered into inventory could make the national vacancy rates rise.
For the office sector of commercial real estate, Reis reports a slight increase in construction. From the first to second quarter, office construction increased by approximately one million square feet. Since a large number of leases for office space were signed during the lowest point of the market, rental rates were very low for tenants. This provided a win-win for both tenants and landlords; tenants secured inexpensive rent and landlords increased a greater number of tenants.
Finally, CRE construction volumes for the retail segment have remained at all-time lows. According to the Reis report, community center vacancy rates for the nation are at a high of 9.9%. In the southern regions of the United States, the need for neighborhood centers is there, but for the rest of the country it has shown a significant decline. Online retail stores, or e-commerce, have proven to be fierce competition. Reis predicts this trend to continue in the future for the retail sector.
In conclusion, the Reis report has market research that is valuable to anyone in the commercial real estate industry. Summarized above are the three portions of the Reis second quarter report for CRE construction activity. To view and read the full report, we invite you to click the image below.