Commercial fundamentals in smaller markets continued improving during the Q2 of 2016. Leasing volume accelerated during the quarter, with an 8.7% increase over the prior quarter. Leasing rates advanced at a steady pace, rising 3.7% in Q2. Office properties posted rents averaging $32/sq. Ft., while retail and industrial leases recorded $38 and $22/sq. Ft. respectively. Average apartment rents for the first quarter were $535 per unit.
NAR members’ average gross lease volume for the quarter was $229,658, 51.4% lower than the previous period. New construction picked up, posting a 5.3% gain from Q1 2016. Tenant demand remained strongest in the 5,000 square feet and below segment, accounting for 82.0% of leased properties. Demand for space in the 10,000 – 49,999 square feet segment rose from 5.0% in Q1 of 2016, to 8.0% in Q2 of this year. Lease terms remained steady, with 36-month and 60-month leases capturing 60.0% of the market. Two-year leases made up 15.0% of total.
Vacancy rates continued declining, ranging from a low of 5.0% for apartments to a high of 13.2% for hotel properties. Office vacancies declined 365 basis points year-over-year, to 12.3%. Industrial availability witnessed a yearly decrease of 95bp to 9.8%. Retail vacancies slid 70bp basis points on a yearly basis, to 11.8%. With declining vacancies, lease concessions declined 5.5%.