Commercial real estate sees healthy demand in second quarter, says Nareit (BATS:REM)

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Commercial real estate saw strong demand across most sectors in the second quarter despite a slowing economy, which was reflected in the continued strength of their fundamentals, according a report by the National Association of Real Estate Investment Trusts.

The construction of apartments as % of existing inventory remained close to its all-time high at 4.6% during the quarter. Meanwhile, for industrial construction, the figure stood at a record high at 3.6% of existing stock, at nearly 650 million square feet. new facilities under construction.

However, office construction declined on uncertainties about the impact of working from home on the sector, reaching 1.7% of existing stock in the quarter.

Commercial construction has maintained a level around 0.5% of existing inventory since the middle of 2019, with 59.4 million square feet of commercial properties under construction in the second quarter.

Here is an overview of quarterly construction in different sectors:

Net absorption remained higher than net deliveries for both industry and retail trade, while the reverse was true for apartments and offices.

Office and apartment vacancy rates increased, driven by market fundamentals. However, vacancy rates in industry and retail trade were lower.

Rolling four-quarter rent growth rates remained positive across all sectors, Nareit said in the report.

In the second quarter, the growth rate of apartment rents moderated to 9.7%, while the industrial sector saw rents increase by 3.1%.

Office rents grew modestly by 1.2% in the quarter, well below pre-pandemic levels. Growth in retail rents also came in at 1.2%.

Here is an overview of the quarterly rent growth in the different sectors: