Skip Ribbon Commands Skip to main content

CBRE Group, Inc. Reports Continued, Moderate Improvement in U.S. Commercial Real Estate in the Third Quarter of 2012

Vacancy Declines Across All Property Sectors

Los Angeles, October 10, 2012 The U.S. commercial real estate market continued to show moderate improvement across all property sectors in the third quarter (Q3) of 2012, according to the latest analysis from CBRE Group, Inc. 

  • Vacancy in the nation’s office buildings continued to decline, falling 20 basis points (bps) during Q3 to 15.5%.

  • National industrial availability1 dropped 10 bps during Q3 to 13.1%, continuing a two-year favorable trend.

  • Retail properties continued to see modest improvement in availability, which fell 10 bps to 12.9%, during Q3.

  • Demand for the nation’s apartment buildings continued to be strong, with vacancy in Q3 at 4.6%, a decrease of 40 bps from a year ago.

    “Real estate occupancy continues to improve slowly, mirroring the sluggish economic recovery,” said Jon Southard, Managing Director of CBRE’s Econometric Advisors group. “However, local conditions continue to vary widely. The majority of markets did see more space occupied than in the prior quarter, but in many markets, the occupancy increase was not enough to significantly decrease the total space available.” 

Office Market
Slow job creation did not derail the office recovery in Q3, with the national office vacancy rate declining by 20 bps to reach 15.5%. The vacancy rate has declined by 70 bps on a year-to-year basis, indicating that the office recovery is continuing despite economic headwinds. The national suburban vacancy rate fell by 10 bps to 17.3% while the national downtown vacancy rate also fell by 10 bps to reach 12.4%. Occupancy improved in 36 markets, including 16 markets where vacancy decreased by at least 50 bps. Technology- and energy-driven markets continued to set the pace, including San Jose, Boston, Portland, Fort Worth and Austin. 

“Although low construction activity has helped office markets throughout the recovery, in the near term, job growth remains below what is needed to sustain more meaningful demand for office space,” said Mr. Southard. “Furthermore the uncertainty about the economic implications of the “fiscal cliff”2 has restrained absorption in key markets like Washington DC. If the fiscal cliff is resolved soon, this could boost private- sector confidence and make way for stronger nationwide job growth and office absorption in 2013 and 2014.” 

Industrial Market
Q3 2012, with an availability rate of 13.1%, is the ninth consecutive quarter in which industrial availability has declined. Over the past two years, the industrial market has seen a slow but steady decline in availability, which is now 150 bps below its pre-recession peak. The recovery continues to be broad based with 36 markets reporting declining availability rates, 15 showing an increase and nine unchanged. The availability drop during the quarter was led by Minneapolis, Jacksonville and Hartford (all at -90 bps). Chicago and Los Angeles, the nation’s two largest markets, were each down by 20 bps. 

Retail Market
Despite a continued cautious approach by retailers toward taking new space, the national retail availability rate declined slightly to 12.9% in Q3 2012, down 10 bps compared to the previous quarter and 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 Q2 2012.  Notable top performers included Cleveland, Jacksonville, Bakersfield, Charlotte and Cincinnati; each of these markets recorded a decline of at least 100 bps.  On the other end of the spectrum, markets such as Las Vegas, Indianapolis, Tampa and Fresno recorded increases in availability rates of at least 50 bps in Q3.  Compared with a year ago, some markets have made strides toward availability rates coming down from the highs set following the recent recession, with those farthest below including Bakersfield, Ventura, Cleveland and Cincinnati.  

Apartment Market
Expansion in apartment fundamentals continued but the pace slowed in Q3 2012. The vacancy rate for Q3 2012 dropped to 4.6%, 40 basis point (bps) below its year ago level. The four-quarter trailing average remains near 5%, or 30 bps below the long-term (20-year) average. Compared with a year ago, vacancy rates declined in 52 markets in our coverage space, with the biggest year-over-year declines in vacancy (150 bps or more) in Charlotte, Houston, Dayton, Phoenix, and West Palm Beach.  Markets with the lowest vacancy rates (3% or lower) included Pittsburgh, Minneapolis, Oakland, San Jose, Columbus, Cleveland, Edison, Salt Lake City, and Newark. With the continuing gains in occupancy, effective rent growth will remain strong and apartment fundamentals should continue strengthening throughout the remainder of 2012.  However, apartment starts have also picked up rapidly, and while new supply is still low relative to the average of the past 20 years, it is on pace to catch up with this historical norm by the end of the 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 does 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 Offices Global

CBRE Offices Worldwide