U.S. commercial property landlords cut rent and offered concessions to lure tenants as vacancies remained high, the National Association of Realtors reported in a quarterly property survey released on Thursday.
An index measuring conditions in the commercial real estate sector rose 2.8 percentage points to 41.0 in the second quarter, well below a level of 100 that represents a balanced marketplace. The last time the commercial market was in equilibrium was in the third quarter of 2007.
Although the index remains weak, this marked the third consecutive quarterly improvement.
Vacancy rates are beginning to level off in some sectors, but rent discounts and moderate levels of landlord concessions are widespread, Lawrence Yun, the NAR's chief economist, said in a statement.
With vacancies still elevated, commercial real estate development remains stagnant in all regions, the NAR said. The weak commercial real estate market has been a significant drag on economic growth in the past two years, subtracting from gross domestic product in seven of the past eight quarters.
The NAR said it expected the office vacancy rate to increase to 17.0 percent in the second quarter of 2011 from 16.7 percent in the latest period.
Apartment rental buildings, which have been one of the few bright spots in the hard-hit commercial real estate sector, will likely see another decline in the vacancy rate to 5.6 percent next year from 6.0 percent in the most recent quarter.
(Editing by James Dalgleish)