Investors are taking an interest in commercial real estate, primarily apartment and office buildings. Retail space -- not so much. By Jerome Idaszak, Contributing Editor and Laura Kennedy, Associate Editor January 28, 2010 Bargain hunters are starting to sniff around commercial real estate markets, though retail real estate remains under a heavy cloud.Apartment and office buildings in Washington, D.C., New York City, San Francisco and Boston are sparking a bit of interest -- a signal that the bottom is nearing. “While we may not have bottomed completely, investors are looking at fundamentals and future prospects,” says Alan Pontius, managing director at Marcus and Millichap Real Estate Investor Services. “Investors are no longer trying to time the market.” Average prices for commercial real estate are likely to keep slipping, though, dragged down by declines of up to 20% in Atlanta, Las Vegas, Phoenix and other areas with a hefty surplus of space. Brighter spots, where prices will flatten out this year, include Los Angeles, Austin, Texas, Washington, D.C., Portland, Ore. and North Carolina’s Raleigh-Durham area. “The good news is that the freefall we saw in 2009 is over,” says Robert Bach, senior vice president at Grubb & Ellis, a commercial real estate advisory firm. Advertisement On the retail front, store closures this year will again be more numerous than usual, though fewer than in either 2008 or 2009. Rents will soften further, sliding by about 4% after space improvements and other concessions are taken into account. Odds are it’ll take about five years for rents to regain their 2008 highs, even though minimal space will be added -- only 12 million square feet in strip malls this year, for example. That’s 20% more than last year but less than half the typical annual increase over the past decade for the “necessity based” outlets. Retailers that have the capital are being extremely picky about new space, taking over vacant locations only in prime spots. Big chains are using their funds to redevelop existing stores -- making them better draws, rather than adding space. For weekly updates on topics to improve your business decisionmaking, click here.