Avison Young – US Commercial 2012 Forecast


While office absorption increased slightly in many markets in 2011, the absorption was modest. Nationally, the vacancy rate dipped to 12.5% in 2011 from 13% in 2010. Avison Young’s U.S. office markets recorded an overall average vacancy rate of 15% in 2011, a 110-bps improvement over 2010. Chicago witnessed the largest decrease in vacancy, receding to 15.1% in 2011 from 20.2% at year-end 2010.

In other markets, Atlanta (16.9%) saw its absorption trend positively approaching year-end while Boston (18.7%) and Las Vegas (19.6%) witnessed small upticks in their vacancy rates. Meanwhile, Dallas (17.7%), Los Angeles (12.9%) and Washington, DC (11.7%) experienced vacancy declines. Houston vacancy remained steady at 13.8% over the year, but is beginning to shift to a landlord’s market. Most of Avison Young’s U.S. markets are forecast to see tepid and fluctuating vacancy rate improvement in 2012.


While the overall U.S. retail vacancy rate came in at 7% in 2011, vacancy levels in Avison Young’s U.S. markets ranged from 4% in Washington, DC to 12% in Las Vegas. A few markets remained stable over the year while others experienced falling rental rates and continued oversupply.

Houston is witnessing a slow turnaround and reduced vacancy, leading to major retailers planning future expansions. In Las Vegas, many big-box centers that were eagerly built a few years ago in anticipation of future residential developments remain vacant. Washington, DC saw an overall decrease in its retail vacancy as new restaurants opened in select neighborhoods and the service retail sector continued to expand. Boston witnessed several national retailers fill vacancies left during the recession. More stabilization for the retail sector is anticipated in 2012, with development stalled in most cities until the economy further improves.


The U.S. industrial market witnessed positive tenant demand in 2011, resulting in an overall vacancy rate of 9.6%. Vacancy in the Avison Young industrial markets performed similarly to the U.S. as a whole and declined to 9.7% in 2011 from 10.2% in 2010. As growth remains slow, minimal new construction will occur in the major markets in 2012. Improved vacancy rates and positive absorption are forecast for many markets, including Dallas, which is expected to see its vacancy decrease to 9.6% from 10.6%.

Houston and Los Angeles led Avison Young’s U.S. industrial markets in 2011 with 5.6% and 4.2% vacant, respectively, and with rents rebounding due to their strategic port locations. In Chicago’s 1.15-billion-square-foot industrial market, recovery is underway in select submarkets such as O’Hare.


The U.S. investment market witnessed strong demand and increased velocity in 2011 and, as in 2010, cross-border investors made significant investments in the U.S. As year-end approached, Canadian buyers alone had closed on $5 billion in office, industrial and retail assets, and overall transaction volume in the U.S. neared $200 billion. Investment opportunities remain available for investors looking at non-coastal markets in 2012.

Several of Avison Young’s markets experienced positive investment trends in 2011. In Atlanta, value-add opportunities attracted significant buyer interest. Houston was one of the country’s most active markets and 2012 will be another year of strong investor interest. Chicago proved to be a solid choice for investors and witnessed a spurt of capital-markets activity in the first half of 2011 with several industrial portfolios changing hands. Duke Realty, Industrial Income Trust and Heitman Realty all made notable investments in the Chicago market. Boston saw a return of sustained liquidity and a broad range of asset sizes and classes trade in 2011. And in Washington DC, sales for office, retail and industrial properties reached $8.4 billion as investors’ appetite for assets in the National Capital Region continued.

Overall, predictions of a meaningful U.S. real estate recovery in 2011 were replaced with tempered forecasts by mid-year. Avison Young anticipates 2012 will continue the trend of modest fluctuating recovery as was experienced in 2011.

Source: Avison Young


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: