Two articles from Bloomberg and one from The Wall Street Journal paint a picture of conditions for investment real estate. Apartment vacancies are falling and rents are increasing as a result of constrained supply and increasing demand. (See my last post as well.) There is some construction underway, but that supply is not expected to hit the market until 2012 or 2013.
Office vacancies in the Central Business District are falling as well. Corporate hiring is driving the absorption of space. Vacancies are about a full percentage point lower than a year ago, and are only 2/10ths of 1% higher than the recent low of nearly two years ago.
Meanwhile, the headline is that vacancies in shopping centers are increasing. The reality is that community shopping center vacancies increased only 1/10 of 1% over the past year. And while the article does not give earlier period comparisons, I suspect that regional mall vacancies are not changes significantly. I draw this conclusion from the firm rents for both property types.
These trends bode well for investment real estate over the next few years. With vacancies declining and rental rates firming or even rising, cash flows will improve and yields increase. Very positive developments for investors.
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