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US Real Estate Fundamentals ''Improving''

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US Real Estate Fundamentals ''Improving''

By - Monday 01 October 2012

The fundamentals of both the US's commercial and residential property sectors are improving, despite the wider economic issues facing the country. According to a report by Cornerstone Real Estate Advisers, the industry is moving forward "at a modest pace", with the company adding that "sluggish employment gains are enough to maintain or improve occupancies in the face of limited new supply" in the commercial real estate industry.

Investors are also looking for new areas to focus on, and the firm highlighted the fact that there is an increasing level of property investment in asset classes and sectors that have experienced "robust job growth" so far this year. Nationally, office vacancy rates have declined by 30 basis points (bps) and stood at 15.7 per cent at the end of the second quarter of the year. The industrial sector also saw the amount of available space drop by 20 bps. Among the markets to see occupancy rise significantly in the second quarter of the year were Chicago, Detroit, Seattle, Riverside County and Miami, Cornerstone revealed.

The retail industry is largely stagnant, recording a marginal fall in vacancy rates of 10 bps in the three months from April to June. However, a reduction in consumer spending is likely to dent the prospects of this sector and delay a full recovery, the firm stated. This does not, however, mean that real estate investment in US retail assets will stall, with a recent Jones Lang LaSalle report suggesting that, despite the recent slowdown in transactions for shopping centres, investors are still keen to own US retail properties.

According to the research, investment activity has largely been focused on five key markets since the onset of the financial crisis - Los Angeles, Chicago, New York, Washington DC and San Francisco. There are signs that investors are beginning to broaden their horizons, though, with the firm stating that "given the difficulty in sourcing product, as well as fierce competition for those assets that are introduced to the market, the list of target locations is now expanding to include many secondary markets".

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