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Multifamily Sector Will Remain Tight Despite Slow Decline in Vacancies

The multifamily sector may not see much of a decrease in its vacancy rate over the next year, but the market is still considered to be tight and there's still room for growth, according to a report from ""National Association of Realtors"":http://www.realtor.org/ (NAR).

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The NAR offered projections into four areas of commercial real estate: office, industrial, retail and multifamily markets.

Out of all four sectors, the vacancy rate for the multifamily sector is expected to decline the least and fall by just 0.1 point.

Despite the small decrease, NAR said the multifamily sector still has the ""tightest availability"" and the ""strongest rent increases"" compared to the other sectors.

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For example, while the office market is projected to fall by 1 percentage point over the next four quarters to 15.7 percent, the apartment rental sector is expected to have a vacancy rate of 3.9 percent next year, even with the slight decrease.

NAR explained it's a landlord's market when vacancy rates slip under 5 percent, and as a result, higher rents can be justified.

Metro areas where the multifamily sector has the lowest vacancy rates are Portland (2.1 percent), New York City (2.2 percent), and Minneapolis (2.3 percent).

NAR also expects multifamily rentals to grow 4.1 percent in 2012 and 4.6 percent into 2013.

Net absorption for the multifamily sector is predicted to be 219,700 units for 2012 and 234,600 units in 2013, according to the NAR.

As for the other sectors, the industrial vacancy rate is expected to fall by 0.6 point to 9.5 percent into the fourth quarter of 2013, and the retail vacancy rate is forecast to fall 0.2 point to 10.6 percent next year.

NAR chief economist Lawrence Yun stressed the need for job creation to increase demand for commercial real estate.

""The economy is expected to grow 2.5 percent next year, and with modest job creation, assuming there is no fiscal cliff, the demand for commercial space will gradually rise. The greatest friction that remains is a tight credit environment, notably for smaller properties,"" he added.

About Author: Esther Cho

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