Despite the decline in the residential real estate market, commercial real estate is steady, “although investment is waning following a record year in 2007,” according to the National Association of Realtors.

“We’re seeing no significant changes in vacancy rates or rent growth, so the fundamentals in commercial real estate still seem to be respectable,” said NAR chief economist Lawrence Yun. “Under normal circumstances, near-full occupancy coupled with positive rent growth would be of strong interest to investors, but we’re not seeing that. The credit crunch has filtered into the commercial real estate market.”

Patricia Nooney of St. Louis, chairwoman of the Realtors Commercial Alliance Committee, said the investment cycle appears to be turning.

“It looks like investors are taking a wait-and-see attitude,” she said. “Even with fairly stable fundamentals and capital available from institutional investors, it appears investor confidence has declined, and some private investors have had problems obtaining financing. Commercial real estate investment set a new record in 2007, but now that we’re in a period of economic uncertainty, transaction volume is likely to decline.”

Investment in commercial real estate in 2007 was $427.2 billion, up 39.2% from the previous record of $306.8 billion in 2006. That total does not include transactions valued at less than $5 million or investments in the hospitality sector, based on analysis of data from Real Capital Analytics. NAR projects the investment dollar volume this year could drop by 30% to 40%, comparable to 2006 levels.

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