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Growth Expected in Many Sectors of Commercial Real Estate

Despite rising interest rates and inflation, many chief economist expect commercial real estate to continue to perform well. The commercial market generally follows the overall economy, but economist are noting things are different this time around, and, instead, expect growth in many real estate sectors. 

Some differences noted this time, which add to expected growth are: 

  1. The residential housing shortage will result in solid rent growth over the next two years, with apartment rents expected to keep rising by more than 10%. 
  2. The industrial property market is getting a second wind from the shift to "just-in-case" inventory buildup, and with strong demand, industrial rents are likely rise in the next two years with vacancy rates remaining below 5%.
  3. While the overall office market is wobbly, variance exists depending on location and improvements are expected in some midsize markets as companies seek more affordable office locations away from major U.S. cities.
While rising interest rates are posing a risk to economic growth, NAR Chief Economist Lawrence Yun expects the commercial market to perform well despite the headwinds, especially in the short term.


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