Commercial Real Estate in 2016 – “Sustained job growth throughout the country and improving credit conditions are forecast to help keep commercial real estate activity expanding into next year …”
Commercial Real Estate in 2016:
Commercial Market Forecast
So, what can we expect of Commercial Real Estate in 2016? Most analysts have released their commercial market forecasts for next year, and they generally agree that we should see continued growth, but that prices may pull back a bit.
We’ve seen sustained job growth in all areas of the country, and credit conditions are also improving. Both of these have sustained and driven the commercial real estate market, along with the activity of foreign investors. NAR analysts are expecting continued moderate growth, but say that prices may pull back in major areas that have reached their peak. Foreign investors, who have been at the root of rising prices in many areas … like Southern California … are currently being seen to become interested in more moderately priced areas, such as those in the mid-west rather than the west or east coast. That change of focus, combined with expected rate hikes by the Federal Reserve, should work together to pressure prices in “topped out” markets downwards.
Some analysts cite economic forces that have held growth back a bit, but most agree that growing employment will pressure vacancy rates down. The only exception to this may be in the multi-family sector as large construction projects in the pipeline reach completion over the next few months, and the availability of units rises.
Here is a comprehensive breakdown by Adam DeSanctis of the National Association of Realtors
Moderate Expansion, Easing Prices Expected for Commercial Real Estate Markets | National Association of Realtors
“Even though rising occupancy and rents will continue, property prices are forecast to decline slightly in 2016 as the Federal Reserve starts to raise interest rates. With cap rates already compressed to very low levels, Yun anticipates short-term rate increases in December, and then again in March, which could slightly temper market growth. However, investments are still expected to continue on an upward trend.”
Southern California Commercial Real Estate in 2016
The Southern California Commercial real estate market is one of those that has been pressured by the foreign investor and is a prime candidate for the future action described in the NAR report. Expect continued, moderate growth with falling vacancy rates but possibly lower prices.
Happy New Year!
Commercial Real Estate in 2016