Index sees strength in U.S. commercial realty market

Commercial real estate market conditions nationally gathered strength in the fourth quarter of 2005, according to a survey conducted by the Society of Industrial and Office Realtors.

SIOR’s survey in November of its members resulted in a Commercial Real Estate Index of 115.75. An index score of 100 indicates a broadly balanced market, and the higher the score, the stronger the market conditions, according to SIOR.

Recent improvements in commercial vacancy rates, active demand for new building sites, and a vanishing overhang of sublet space are the clearest indicators of increasingly positive fundamentals for industrial and office real estate, according to SIOR.

The survey found that rents are rising moderately and investment pricing is typically providing a premium over new building construction costs.

The survey also found that leasing activity is back to normal levels, but tenants can still effectively bargain for concessions in leasing contracts, and supply/demand conditions have yet to bring development activity back to its long-term sustainable volume.

Also, the survey found, the industrial real estate markets appear to be slightly ahead of offices in the recovery phase of the cycle. The Index score for industrial property is 118.05, vs. 114.66 for offices.

The survey was developed and results analyzed by Hugh F. Kelly, CRE, clinical professor at New York University, who has worked with SIOR on research projects since 1989. – JEFF FEINGOLD