Preliminary Trends for Q3 2012:
Office Market Recovery Continues to Languish
Second quarter GDP growth was revised downward to a paltry 1.3% growth rate, and as a consequence of weak economic growth, labor market performance remains anemic. Although the unemployment rate has edged down, this has been due more to jobs being created in sectors that do not generally utilize office space such as retail, leisure/hospitality, education, and healthcare. Consequently, performance in the office market has been weak.
- Q3 vacancy declined by 10 basis points to 17.1%
- Q3 asking and effective rents grew by 0.2% and o.3%, respectively
The outlook for the remainder of the year for office properties is modest at best. Uncertainty continues to swirl around the US economy and many organizations are unwilling to make decisions about hiring and business plans. The economy is likely to plod along for the foreseeable future, and while the outlook is not heartening, it is not entirely unexpected either. Look for more detailed trends and analysis in the office sector, as well as metro specific data in the weeks ahead as Reis prepares to officially launch Q3 market data.
Retail Market Recovery has Stalled
With the US economy struggling, consumer spending remains weak and inconsistent. Demand for neighborhood and community center space remains at very low levels as retail sales struggle and consumer confidence remains on the mend.
- Q3 vacancy was unchanged
- Q3 asking and effective rents both grew by 0.1%
Malls continue to outperform their neighborhood and community shopping center counterparts. However, underlying these trends there remains a strong diverge in the performance between dominant Class A malls that boast luxury retailers and cater to affluent customers, and inferior malls which contain more mainstream retailers and serve typical consumers. This is masking the problems inferior malls are facing.
The outlook for the remainder of the year remains cautious. We expect continued overall improvement in retail with malls continuing to outperform neighboring and community centers during the robust holiday shopping season in Q4. Look for more detailed trends and analysis in the retail sector as Reis prepares to launch Q3 market data in the weeks ahead.