Moderate demand growth continued in the fourth quarter of 2015 (4Q15) for income-producing properties, real-estate analysis firm Dividend Capital Research reported on February 29 in its quarterly Cycle Monitor analyzing conditions in more than 50 metro areas. A chart showed nearly all property subtypes were in the expansion phase of the real estate cycle, characterized by new construction along with declining vacancy rates. The exceptions were office—downtown, which was in recovery (no construction despite declining vacancies) and close to expansion, and office—suburban, which was at an earlier stage of recovery (declining rents). Office occupancy rose 0.2% in 4Q15 and was up 0.5% year-over-year (y/y).”Solid employment growth helped tenants absorb more than 17 million square feet in 4Q15 led by the Chicago, San Francisco and Seattle markets. New construction remained lower than absorption for the year and was still 30% less than the pre-recession peak in 2006. Pre-leased space was above 60% in new construction, indicating that tenants are optimistic about their future business prospects.” Industrial occupancies increased 0.2% in 4Q15 and 0.6% y/y, “with 70% of the markets covered now having rents that allow for cost-feasible new construction.” The national apartment occupancy average declined 0.3% in 4Q15 and was flat y/y “because new construction is higher than demand and continues to accelerate. Retail occupancies were up 0.1% in 4Q15 and 0.5% y/y. Hotel occupancies increased an average of 0.2% in 4Q15 and 1.0% y/y.
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