The Connecticut/Western Massachusetts chapter of The Society of Industrial and Office Realtors (SIOR) announced the results of its semi-annual membership survey. The survey measured market conditions for the commercial real estate market for the period July through December 2014 within the region.
A significant majority of responses indicated improvement or stabilization in the market. Members noted improvement from the first half of 2014 to the last half of 2014 with 67 percent indicating improvement, 24 percent indicating no change in market conditions and 9 percent indicating a decline.
Comments by members noted the continued slow pace of recovery and that market activity lacks depth and velocity, according to a press release. Absorption is occurring but new users to the market are limited and transactions with existing users are often renewals or relocations with a decrease in space or increased density. Survey results demonstrate continued improvement in the region’s commercial real estate market, but robust growth will require increased economic activity.
Predictions for market conditions for 2015 were optimistic with 62 percent indicating improving and 38 percent indicating no change in conditions.
However, most members did not anticipate that the improvement in market conditions would result in improved market lease rates during the first six months of 2015. Industrial lease rates are expected to remain unchanged, according to 65 percent of survey respondents.
Office lease rates are also expected to remain unchanged, according to 74 percent of respondents.
Expectations regarding the direction of market vacancy rates are slightly more positive for industrial than office. Nearly two-thirds of respondents said industrial vacancies will decrease, while 57 percent predict the office vacancy rate will remain the same.
A slight majority of responses said industrial properties’ prices have stabilized, with 47 percent anticipating an increase.
For office space, 87 percent of respondents said prices have stabilized. A majority said investment cap rates will be unchanged, although 31 percent predicted a decrease in cap rates.
Over two-thirds of respondents said development activity will remain at current levels, with 29 percent anticipating a decrease.
