Commercial Real Estate – “It is probable that global uncertainty will serve to keep interest rates low and allow for growth of fundamentals in the commercial real estate markets and in the broader domestic economy.” …
Commercial Real Estate:
2016 Market Outlook
Outlook Remains Positive As Capital Refocuses On Different Areas
When trying to predict the 2016 commercial real estate market outlook, one is faced with a dizzying array of contradictory factors. There have been some drastic changes in fundamentals over the last year or so, such as the decline of world financial markets. The current behavior of the Chinese markets is a case in point.
However, when all is said and done, the fundamentals of the U.S. commercial real estate market are sound. The economy, for instance, is growing slowly but solidly. I’ve said many times that I’d rather see an economy growing more slowly than some would like than I’d like to see one growing too quickly and thereby falling into recession. Slow, solid growth is always more preferable than the “boom and bust” behavior we saw in some recent decades.
What we’re seeing right now is the refocusing of capital away from areas now becoming too “pricey”, and towards areas that have yet to fulfill potential. Today I want to share with you an article by a real expert on this subject, Kevin Maggiacomo, President & CEO of Sperry Van Ness International Corp. (SVN). In this great analysis, Kevin points out some very interesting bits of information that are pertinent to us here in Southern California.
2016 has started with higher levels of volatility in United States equity markets as a result of justifiably significant fears of global economic pressures causing falling demand domestically. While some investors are taking a fearful stance, we see a different outcome. It is probable that global uncertainty will serve to keep interest rates low and allow for growth of fundamentals in the commercial real estate markets and in the broader domestic economy. Furthermore, even in the event of a domestic economic slowdown, the global uncertainty could lead to lower interest rates and even greater inflows of foreign capital, supporting the domestic commercial real estate market (the current risk / reward proposition of U.S. investment is unbeatable).
California Commercial Real Estate Forecast
To me, the most interesting items in Kevin’s article are the lists of areas that were “hot” in property sales in 2015 as opposed to the ones he predicts will become “hot” growth areas during the coming year. He sees the major, well-known commercial markets like Los Angeles, San Francisco, and San Jose (speaking just of California here), being surpassed in terms of rate of growth by what we might term “secondary” areas like Orange County and the Inland Empire, along with areas of Central California.
These will be the areas for Commercial Real Estate investors to watch as we move into 2016.
Commercial Real Estate.