March 18, 2012 / By Dave Dickerson, President/Partner

Dayton Commercial Real Estate Market Trends

The market trends for the Dayton region are focused on four distinct sectors, multifamily, office, industrial, and retail. The following is Miller-Valentine Group Realty Services’ overview of the current real estate market in terms of the five following outlooks: vacancy and absorption trends, sales prices and sales volume trends, lending climate, and the market cycle forecast.

The vacancy and absorption trends in the Dayton region since 2007 have had a moderate recovery in all four sectors. The office market is stabilizing and moving into a recovery stage. Occupancy and rental rates are stabilizing in the North and South markets, and the Central Business District, showing improvement in every submarket but the East. The industrial market is still in the beginning phases of recovery with vacancies trending downward since 2011. The retail market is showing a stronger market segment. Vacancy rates peaked in 2010 and have trended downward by almost 14% since then. Retail rental rates have remained stable overall during this recovery phase. The multi-family market is showing the strongest improvement with vacancy rates steady near 6%.

Office, Industrial, and Retail markets are showing recovery trends in both sale price and volume. The office market’s sales volumes fell to market lows in 2010 and have been increasing since then. The industrial market’s low was in 2009 but there was a dramatic turn-around in 2011 and 2012. The average sales prices for the retail and office markets are also recovering. The sales prices for the industrial market are recovering but still not at the levels they were in 2008.

There were dramatic declines in 2008-2009 in total originations, commercial bank’s originations, life companies’ originations, and conduit originations due to the economy being stalled. Today there is greater optimism in the lending industry. There is increased lending in all areas with lenders considering more conceptive projects. Interest rates are increasingly attractive and values are recovering.

In general, the four markets all appear to be in a state of recovery. The multifamily and retail markets are moving from the recovery to the expansion phase with decreasing vacancies, increasing construction activity, high absorption for the multifamily family market, and moderate absorption for the retail market. The office and industrial markets are both in the early stages of the recovery phase with decreasing vacancy rates, low to minimal construction activity, and moderate absorption. Overall, the Dayton market seems to be in a state of recovery and will continue to flourish.