What’s In The Forecast for Commercial Real Estate?

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We know that Dallas-Fort Worth has gained international attention for its current real estate landscape, but what’s to come for the macro environment of commercial real estate? Green Street recently asked experts to weigh in on what direction real estate is heading and analyzed the current state of the market. Below, we’ve compiled a quick snapshot of the key takeaways from the report.

  • More than 70% of those asked think that real estate values are going up or will stay flat.
  • Economic growth is expected to pick up this year as tax cuts and deficit spending take effect.
  • With supply and demand roughly in balance, we can expect inflationary-type rent growth for the near future.
  • Most property sectors, with the exception of retail, are seeing some level of rent growth
  • Green Street expects annual growth in M-RevPAF to be between -1% and 5% annually over the next five years with industrial at the high end, and strip centers at the low end.
  • The outlook for retail is not positive, with a majority of the U.S. over-retailed.
  • Values for retail and industrial real estate have diverged by a remarkable 25% in the past 12 months.
  • An important takeaway is that performance has been dictated more by property sector than by geographic location.
  • Nominal cap rates in most of the major property sectors appear to be inching up, with the exception of industrial.
  • In the case of malls, cap rates have gone up and the gap between higher- and lower-quality assets has widened considerably.
  • Cap rates for power centers in tertiary markets are up over 200 basis points over the past 18 months.
  • The corporate bond market says real estate is fairly priced, while the REIT market says it’s expensive.

You can read the full report here. Tell us – where do you think the market is headed over the next 12 months?

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