Reit.com recently took a look at the Urban Land consensus outlook in which it was indicated that commercial real estate still continues to firm. The “ULI Real Estate Consensus Forecast” is a semiannual survey of economists and analysts at the nation’s leading real estate organizations. The forecast findings include both near-term and longer-term projections for a wide variety of key economic and industry indicators, ranging from employment figures to housing starts to property sector performance.
The most recent survey was conducted in September, and involved 51 leading real estate economists/analysts from 37 organizations. Results were released on October 19 with a webinar and panel discussion featuring Gadi Kaufmann, Managing Director/CEO of RCLCO, Jim Clayton, Head of Investment Strategy & Analytics of Barings Real Estate Advisers, Eileen Marrinan, America’s Director of Research of Grosvenor, and Josh Scoville, Senior Managing Director of Hines.
“Commercial real estate markets are expected to continue to firm in the next three years, albeit possibly not as robustly as during the past three, according to a recent survey of industry economists,” Reit.com noted in its story. According to the survey, following six years of growth, commercial property transaction volume is expected to decline over the next three years to $428 billion in 2018, according to a new three-year economic forecast from the Urban Land Institute (ULI) Center for Capital Markets and Real Estate.
It was also indicated that while findings in the recent Consensus Forecast for October 2016 point to continued economic expansion over the next three years, it is expected to slow down in pace. Compared to six months ago, survey respondents have also reduced their expectations about interest rates, housing starts, and private real estate returns. Issuance of commercial mortgage-backed securities (CMBS), a key source of financing for commercial real estate which had grown consistently since 2009 to $101 billion in 2015, is expected to decline in 2016 to $70 billion before resuming growth in 2017 and reaching $90 billion in 2018. Additionally, compared to six months ago, forecasts for housing starts over the next three years are less optimistic. Single-family housing starts are projected to increase from 714,500 units in 2015 to 875,000 units in 2018, remaining below the 20-year annual average.
“The length of the current expansion may weigh on forecasters’ minds, as well as uncertainty about the upcoming presidential election and economic and political turmoil abroad,” said ULI leader and survey participant William Maher, director of North American strategy and research, LaSalle Investment Management. “U.S. real estate markets are intricately tied to the broader economy and capital markets, both of which are growing more slowly than earlier in the cycle. It is no surprise that the real estate market is following suit.”