Survey Reveals A Positive CRE Outlook

November 28, 2016

In its tenth survey of economists and analysts from leading real estate organizations, the Urban Land Institute Center for Capital Markets and Real Estate has good news: commercial real estate markets are expected to move in a positive direction over the coming three years.

The survey, which took place in September and was released last month, predicts that vacancy rates will remain low and markets may even tighten further in the office, industrial and retail sectors. This trend will support rising rents and property prices — great news for commercial real estate investors.

And, while real estate transaction volume is expected to stay well above the 15-year average of $280 billion, it is expected to slow. The survey predicts that 2016 will top out at $475 billion, with 2017 reaching $450 billion and 2018 finishing up at $428 billion. This gradual slide represents a decline of 21 percent from the post-recession high of $545 in 2015.

The survey also anticipates that commercial real estate prices will near the average growth rate of 5.7 percent in 2016, but may decelerate in years to come. Survey predictions forecast 4.0 percent growth in 2017 and 2.5 percent in 2018.

The outlook for steady, subdued gains in underlying fundamentals bodes well for the Equity REITs, according to Calvin Schnure, NAREIT’s senior vice president for research and economic analysis and a participant in the ULI Survey.

“Continued job growth is supporting low vacancy rates and rising rents and property prices,” Schnure said. “That’s a recipe for a longer expansion in real estate, generating REIT earnings growth and REIT equity market returns in the years ahead.”

With these predictions in mind, the professionals at Intelica Commercial Real Estate are keeping an eye on local trends to find the best investment opportunities. Contact us today to learn more about the best strategies to capitalize on a firm commercial real estate market.