By Jonathan Gerrard, Carter
ATLANTA (May 10, 2011) – After watching the capital markets begin to improve in 2010 and the first quarter of 2011, we are predicting better days ahead in the commercial real estate forecast. The investment market shows a steady increase in sales volume and cap rates continue to fall. The highest sales volume is still occurring in tier one markets with well-stabilized assets, but the secondary markets are also starting to make a comeback. Banks are beginning to lend more and as property values begin to rise, we should see them unloading more REO properties and distressed assets in most markets.
The leasing market is also showing signs of improvement. While many companies are continuing to consolidate and burn off excess space, the overall US office market saw an increase in gross leasing activity during the first quarter. The general consensus is Class A properties are being absorbed the fastest. Tenants traditionally attracted to Class B buildings are making deals in Class A office buildings. In the first quarter, the nation as a whole saw positive net absorption and decreasing availability rates.
In the next few years, we will most likely see the strongest rent growth in markets with a high concentration of energy and technology companies. Due to industry expansion in these sectors, markets with these types of companies will have higher job growth resulting in a healthy commercial real estate market. Cities to watch include Austin, Boston, Dallas, Houston, Pittsburg and San Francisco.
Atlanta as a whole is also seeing some positive signs. During the first quarter, Midtown led the city with the highest leasing activity as a percentage of inventory. Buckhead is also on the upswing with over 200,000 square feet of positive absorption last quarter. Office tenants seem to find Midtown and Buckhead very attractive due to its high number of Class A opportunities and amenities in the surrounding area. South Atlanta saw the largest net absorption on the industrial side first quarter. Both south and northeast Atlanta are experiencing decreased industrial vacancy rates.
Jonathan leads Carter’s research department and activities.