Occupancy Trends for Commercial and Multifamily Buildings
Property managers are constantly looking to find more about occupancy trends for market research purposes. This blog post goes over projected occupancy trends for the remainder of 2016 in both the multifamily and commercial realm.
We would venture to guess that you could not find someone in the property management space that is not constantly seeking to find out more about occupancy trends. Occupancy trends are something that property managers should always be looking into in order to better understand their market and set realistic goals and expectations for the near future. This blog post will cover a macro level of both commercial and multifamily occupancy trends in the United States for the remainder of 2016.
Occupancy and Multifamily Property Management
The first half of 2015 was good to multifamily with renewal rates 5.4% higher than the previous year at 94.6% (Multifamily Executive). With such a good year, it’s hard to think we can expect occupancy rates to remain that ideal, so many people have been dreading what they believe will be an end to the good fortune in the near future. However, so far this has not been the case. CohnReznick actually believes that for rental properties, demand will exceed supply through the rest of the year with occupancy rates remaining very similar to the previous year. However, there are two key marketplace shifts to look out for:
- B/C properties expect a higher demand as opposed to A properties. This is due to both affordability and availability. Because of this, there will be a shift in focus to this class from investors when making decisions on construction opportunities.
- Similarly due to availability and affordability, millennials will begin to look to rent in the submarkets of urban areas rather than the urban areas themselves.
Occupancy and Commercial Property Management
While predictions in 2016 are less clearly positive, JLL and SVN Fortune Real Estate do predict some good for the near future. Q1’s volume was the lowest it’s been since the recession at 50 million feet, but JLL anticipates that as fears of recession progressively diminish through the year, leasing activity will rise. In addition to this, even though there was a lower volume in leasing during this quarter, there was not much new construction that contributed to low vacancy rates, which allowed asking rates to increase by 3.2%. JLL foresees that rate continuing to rise.
While the United States’s economy will grow at a slower pace than it did in 2015, SVN does not predict that a recession will occur. Given this and the state that occupancy and vacancy rates are currently in, SVN believes that the commercial real estate market will remain in good shape.
Of course, these projections are at a very surface level. Be sure to dig into your particular region for more specific findings.
NOTE: We cover the topic of occupancy in our latest guide, which acts as a part two of two-series encyclopedia on property management topics. For more tips on subjects relevant to your industry, download our free guide: The ABC’s of Property Management Pt. 2.
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