Commercial Real Estate Growth To Gradually Drop Without No Significant Rental Rate Decline

Commercial real estate activity had been expected by new industry forecast to drop over the next three years.  According to a Washington-based industry trade group Consensus, this was the result of interviews with top real estate analysts and economists for a new set of forecasts. ULI's William Maher reported that compared to six months ago, researchers were predicting a more sluggish economic growth, dropping real estate values and low returns from the public and private markets. Six months ago, there was no impending downturn on the horizon, although economies and markets remained volatile and fragile.

The commercial real estate economists ULI surveyed for the new annual forecast said that they are predicting a slowdown in real estate transactions. The trend was expected to be gradual and not a crash, according to a feature from PR Newswire. The report also emphasized that due to the six years of commercial property volume growth, annual transactions were expected to drop over the next three years to $475 billion in 2018, which was down from the expected $525 billion in 2016 transactions.

The commercial real estate transactions though were expected remain at a strong level.The industry leaders predicted no significant declines in rental rates and building occupancy in the ULI report. The forecast further stated that institutional real estate assets were expected to give total returns of 8 percent in 2016, moving to 7 percent in 2017 and 6 percent in 2018.  

Commercial real estate prices, moreover, were projected to increase but at a slow pace over the next 3 years, at 5 percent in 2016, 2 percent in 2017 and 3 percent in 2018, all under the long-term median growth rate of 6 percent. Vacancy rates were expected to improve modestly for retail and office across all three forecast years, according to a feature from The Dallas Morning News. 

Other major findings of the forecast included an issuance of commercial mortgage securities which were expected to decline to $85 billion and then return to $100 billion in 2017 and 2018.