OFFICES: A minor rise in new office buildings in 2006 kept office vacancy rate relatively flat, but with healthy job growth, continued robust absorption levels, and moderate speculative development, the vacancy rate is expected to drop by the end of 2007.
Industrial: A shortage of properties suitable for traditional and inland ports is driving the need for build-to-suit warehouse and distribution facilities. The chic conversion of older industrial properties to mixed-use purposes is also keeping inventories down and rents up. Vacancy rates are forecast to maintain the steady down trend they’ve seen since early 2004. Rents are expected to increase slightly.
RETAIL: Retail is the dark spot in the commercial marketplace. Hit by still-soft consumer confidence and a mega merger between the Federated Department Stores and the May Department Stores that prompted store closings, retail was the only commercial sector in which vacancies rose and rent growth decreased in 2006. Regional shopping centers and neighborhood centers alike are suffering from store closures and softening consumer confidence. Retail vacancy rates are predicted to rise slightly in 2007. Average retail rent is forecast to increase marginally.
MULTIFAMILY: The apartment market is strengthening as potential home buyers remain in rental housing and echo boomers enter the rental market. Vacancy rates will continue to be marginal at best.
Originally published in the Santa Monica Daily Press print edition on January 17, 2007. Read the original PDF.