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U.S. Commercial Real Estate Continues Recovery in Fourth Quarter of 2012, According to CBRE Group, Inc.

Los Angeles, CA – January 10, 2013 – (RealEstateRama) — Despite sluggish economic growth, the U.S. commercial real estate market remained on a recovery path in the fourth quarter of 2012 (Q4 2012), according to the latest analysis from CBRE Group, Inc.

  • The nation’s office markets withstood pressures from an uneven economic recovery, federal budget uncertainties and natural disasters, with vacancy falling by 10 basis points (bps) to reach 15.4% in Q4 2012.
  • National industrial availability1 dropped 30 bps during Q4 2012 to 12.8%, representing the largest quarterly drop since the industrial sector recovery began in 2010. Industrial availability is now down 180 bps from its peak of 14.6% in Q3 2010.
  • The retail availability rate declined slightly to 12.8%, down 10 bps compared to the previous quarter.
  • Demand for the nation’s apartment buildings remains healthy with vacancy in Q4 2012 at 5%.

“The broken record of slow but positive progress toward a real estate recovery continues to repeat,” said Jon Southard, Managing Director of CBRE’s Econometric Advisors group. “The change of note from this persistent trend is the improvement in the industrial sector as shipments are increasing at a faster pace than employment.”

Office Market
For all of 2012 the office vacancy rate declined by 60 bps indicating that the office recovery remains on course. In the final quarter of the year, the vacancy rate fell in 38 markets, rose in 19 and remained unchanged in six. The suburbs once again outperformed downtown markets, with a quarterly decline of 20 bps, versus downtowns’ decline of 10 bps. The suburban vacancy rate ended the year at 17.1%, 70 bps lower than 2011’s year-end rate, while the downtown vacancy rate ended the year at 12.3%, which was 40 bps lower than year-end 2011.

Technology, software, and energy driven markets had the largest occupancy gains in 2012, with vacancy rates in San Jose, Austin, Boston and Houston falling by 200 bps or more. As in 2011, some housing-based or CANVFLAZ (California, Nevada, Florida & Arizona) markets were among the best performers last year, as tenants locked in low rents and expanded their office footprints. Vacancy rates in Phoenix, Miami, Orange County and Ventura fell by 150 bps or more in 2012.

“While the national office vacancy rate has fallen for the third consecutive year, it remains 300 bps above its pre-recession low of 12.4%,” said Mr. Southard. “After a strong start in 2012, job growth was disappointing and while the recent budget deal signed by Congress and the President to avoid the “fiscal cliff”2 might ease some near-term concerns, uncertainty surrounding continued negotiations on the federal debt ceiling and further government spending cuts will continue to pose near-term downside risks for commercial real estate. However, private sector hiring and confidence should accelerate if Washington DC is able to forge a long-term budget deal and concerns in Europe remain at bay, paving the way for stronger office-using job growth and absorption.”

Industrial Market
Q4 2012, with an availability rate of 12.8%, is the tenth consecutive quarter in which industrial availability has declined. During the past two years, the industrial market has seen a slow but steady decline in availability, which has fallen from 14.6% in 2010. The recovery continues to be broad-based, with 40 markets posting declines, 16 showing an increase and five unchanged. Minneapolis continued to lead the decline in availability drop (-140 bps) followed by Detroit (-130 bps) and Salt Lake City (-120 bps). Chicago, the nation’s largest industrial market experienced an availability decline of 20 bps, while L.A., the nation’s second largest market was unchanged.

Retail Market
Retailers remain wary of taking on substantial amounts of new space but the slow decline in availability continued with the rate falling to 12.8% in Q4 2012, down 30 bps compared to the rate one year ago.  A majority of the retail markets recorded either flat or declining availability rates compared to one quarter ago.  Some notable performers were Denver, Cincinnati, Fort Worth, Kansas City and Minneapolis; each of these markets recorded a decline of at or above 60 bps. On the other end of the spectrum, markets such as Tulsa, Long Island and Bakersfield recorded increases in availability rates of at or over 50 bps in the fourth quarter of 2012.

Apartment Market
The pace of expansion in apartment fundamentals slowed, with the vacancy rate falling 20 bps to 5% at year-end 2012. This is markedly below the decreases of 140 bps and 80 bps recorded in 2010 and 2011, respectively. While demand growth slowed during the quarter, the market remained tight by historical standards, with the four-quarter trailing average vacancy rate holding at 4.9%, or 40 bps below the long-term (20-year) norm. Compared to a year ago, vacancy rates declined in 35 of the 63 markets monitored.  Markets with the biggest year-over-year declines in vacancy (more than 100 bps) included Birmingham, Jacksonville, Charlotte, Atlanta, Seattle, and Norfolk. Markets with the lowest vacancy rates (below 3.5%)) included Miami, Newark, Oakland, Pittsburgh, Minneapolis, Edison, Providence, Boston, and Ventura.  Markets with the highest vacancy rates (above 8%) included Tucson, Memphis, Las Vegas, Jacksonville, and Greensboro.

Effective rent growth should remain strong and apartment fundamentals should continue to improve in 2013 as the economy further recovers.  With effective rents now well above their pre-recession levels in most major markets, new apartment construction activity picked up  in recent months and completions are likely to return to historical norms next year.

1 Availability is space that is actively being marketed and available for tenant build-out within 12 months.

2 “Fiscal cliff” refers to the expiration of certain U.S. tax benefits and the automatic reduction of certain U.S. government spending at the end of 2012 if the U.S. Congress did not take any action to the contrary.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue).  The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at


CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.


Nadja Brandt
Corporate Communications, Pacific Southwest

+1 213 6133627