Finally, some good news. Commercial real estate markets across the U.S. continued on their trend of improvement in the second quarter 2010, according to Moody’s. The news is more than welcome, in that some upward pricing movement is always a good sign for the market, if not for the industries psyche. But the long-standing problems are hardly resolved.

Clearly supply is quite limited, given the quagmire that banks and other investors face. However, if pricing rises, this could help those who are seeking and qualify for refinance deals to get better property values in the days to come.

More Limited Supply: The supply pipeline of new properties continued to shrink across all sectors, with improvement in the balance between supply and demand in six of the seven sectors that make up the market, Moody’s says in its latest Red-Yellow-Green® study.

• Office: While vacancy rates continue to rise due to the poor absorption experienced in 2009, demand going forward is on the upswing and the pace of growth in vacancy rates should begin to flatten and possibly contract in the coming quarters. All the sectors but one showed better market conditions and had higher Red-Yellow-Green® scores than they did in the previous quarter. A greater share of markets—46%–are now in yellow territory than in red territory—43%– while share of markets that are green rose from 17% to 21%.
• Multi-Family: Rose five points from Green 81 to Green 86, mainly because the sector’s vacancy rate decreased from 7.4% to 6.5%.
• Retail: Gained an additional four points this quarter to increase from Yellow 56 to Yellow 60. Though its vacancy rate rose again from 12.4% to 12.8%, the supply-demand imbalance contracted to a mere -0.1%, from -0.3%.
• Industrial: Gained another 14 points this quarter moving its score from Yellow 41 to Yellow 55. High vacancy remains intact as the composite vacancy increased slightly from 13.9% to 14.0%. The increase in score can be credited to both projected absorption and the construction pipeline moving in favorable directions

Tags: commercial real estate, Green Shoots

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