The slowing economy has flattened commercial real estate vacancy rates, the National Association of Realtors said Thursday, but the group still believes the market for commercial space will improve during the coming year.

The Society of Industrial and Office Realtors (SIOR) Commercial Real Estate Index, an attitudinal survey of 266 local market experts, showed an erosion in market conditions, the Realtor group said. All regions posted declines except the West.

The SIOR index, measuring the impact of 10 variables, declined 2.6 percentage points to 54.9 in the second quarter, following a strong gain of 6.8 percentage points in the first quarter. A level of 100, last reached in the third quarter of 2007, indicates a balanced marketplace.

The bright spot in the commercial sector remains multifamily housing.

"Disappointing economic growth in recent months means a slower recovery for most of the commercial real estate sectors, although multifamily housing continues to benefit from pent-up demand resulting from an abnormal slowdown in household formation in recent years," said. "Many young people, who normally would have struck out on their own from 2008 to 2010, had been doubling up with roommates or moving back into their parents' homes. However, they've been entering the rental market as new households in stronger numbers this year. As a result, apartment vacancy rates are declining and rents are rising at faster rates."

Over the next 12 months, NAR projects vacancies to decline 0.3 percentage points in the office sector, 0.6 points in industrial real estate, 0.7 points in the retail sector and 0.9 percentage points in the multifamily rental market (see forecast table here). In that latter category, NAR sees vacancy rates dropping from 5.5% in the current quarter to 4.6% in the third quarter of 2012. Apartment vacancies below 5% are considered a landlord¹s market.

Areas with the lowest multifamily vacancy rates include Minneapolis at 2.5%, New York City at 2.8%, and Portland, Ore. at 2.9%.

Multifamily net absorption is likely to be 237,700 units this year, NAR said.