MBA 1Q Commercial/Multifamily DataBook Reports Uptick in Vacancy Rates, Asking Rents
Commercial property vacancy rates generally ticked up in the first quarter, but so did asking rents, the Mortgage Bankers Association’s First Quarter 2019 Commercial/Multifamily DataBook reported.
Multifamily vacancy rates equaled 4.8 percent in the first quarter, up 10 basis points higher from a year earlier, while apartment asking rents grew by 4.5 percent. Office vacancy rates also grew by 10 basis points to 16.6 percent while office asking rents increased by 2.2 percent. Among retail properties, vacancy rates grew by 20 basis points to 10.2 percent while rents increased by 1.6 percent.
“New [commercial and multifamily] construction activity remains robust,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell, noting the value of new construction of selected commercial real estate types has held steady at a roughly $350 billion seasonally adjusted annual rate–3 percent higher than one year ago.
“Over the last year, construction has grown for multifamily, office and manufacturing space and declined for commercial/retail space,” Woodwell said in the DataBook. Multifamily construction permits and starts remain especially strong in the first quarter, with nearly 600,000 multifamily units currently under construction and commensurate permit and start figures, he said.
Woodwell said the momentum seen in 2018’s record year of borrowing and lending continued in the first quarter. “Volumes were higher for nearly every property type and double-digit growth in loan volume for Fannie Mae and Freddie Mac led the increase among capital sources,” he said. “Low interest rates and strong property values continue to make commercial real estate an attractive market for borrowers.”
Compared to a year earlier, increasing originations for industrial, health care and hotel properties led the overall increase in commercial/multifamily lending volumes. By property type, industrial (73 percent), health care (41 percent), hotels (14 percent), retail (9 percent) and multifamily (9 percent) all saw year-over-year dollar volume gains. The dollar volume of office property loans held steady.
Commercial property price indices told different stories during the first quarter. The Green Street Advisors index increased 0.4 percent, the Real Capital Analytics index rose 1.8 percent and the NCREIF transaction-based index dropped 4.2 percent.
Capitalization rates have held relatively steady for most property types, the DataBook said. First quarter average cap rates of 6.4 percent for industrial, 6.5 percent for retail and 6.6 percent for office all matched the rates from one year earlier. Multifamily properties first quarter cap rate fell 20 basis points to 5.4 percent, below where it was in early 2018.
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