April 26, 2018

Commercial to See ‘Modest’ Growth in 2016

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Commercial to See ‘Modest’ Growth in 2016

Global and domestic economic hiccups won’t likely slow commercial real estate activity this year, according to a new report published by Situs Real Estate Research Corp. (RERC) and the National Association of REALTORS®. Boosting activity this year, the report cites steady job gains and stable leasing demand.

Commercial real estate activity is forecasted to gradually grow this year, across all commercial sectors, according to the report “Expectations & Market Realities in Real Estate 2016—Navigating through the Crosscurrents.” Commercial property values and price gains, however, are expected to flatten, after having recently surpassed 2007 peaks in some major markets.

Read more: 2015 Marked Best Year for Office Sales in Years

"Historically low interest rates, especially in treasuries, combined with commercial real estate's stable prices and value make this asset an attractive investment," says Ken Riggs, president of Situs RERC. "Looking into 2016, the commercial real estate market should moderate, which could stabilize prices."

Vacancies in the commercial sector are forecasted to decline slightly this year across property types – except in the apartment sector, which will likely see a modest increase by the end of the year as new project completions enter onto the market.

Rising rents and steady investor returns will likely continue as job growth persists and demand exceeds supply with limited new construction – except with the multifamily sector, the report notes.

"Supported by solid hiring in most parts of the country, the demand for ownership and rental housing will continue to increase in 2016 despite another year of meager economic expansion," says Lawrence Yun, NAR’s chief economist. "While supply shortages will weigh on housing affordability and push home prices and rents higher, the housing sector will keep the U.S. economy afloat and lead the residential investment component of GDP growth by up to 10 percent this year." 

Source: National Association of REALTORS®