Commercial Investment Real Estate March/April 2016 | Page 9

Residential Ups
and Downs
T e National Association of Realtors is forecasting moderate growth in home sales for 2016, according
to its chief economist Lawrence Yun. Existing home sales grew 6.5 percent to 5.3 million in 2015,
making it the best year since 2006 but about 25 percent below peak year 2005’s total of 7.0 million.
Yun expects 1 percent to 3 percent growth in sales this year, targeting rising mortgage rates, higher
home prices, and stagnant wage growth as obstacles to stronger sales.
On the multifamily side, a 4Q15 drop in rental rates may signal lower rent growth expectations for
2016, according to CoStar. For 1H 2015, CoStar analysis shows that rents grew at an annual rate of
9.4 percent. However, in the second half of the year, rents slowed to a 2.7 percent annualized growth
and actually declined in 4Q15. T is was most noticeable in major markets such as San Francisco
and Washington, D.C., in newer, higher-quality apartments built since 2010. Industry watchers have
questioned the major inf ux of new luxury projects in mostly urban areas commanding higher rents
— more than 80 percent of new construction built between 2012 and 2014 f ts that prof le, according
to CoStar. Another troubling sign is that new projects opening in 3Q15 were 49 percent unleased,
compared with 29 percent unleased in 3Q14, according to CoStar.
U.S. Commercial Real Estate Annual Net Absorption (in msf)
2012Q4 2013Q4 2014Q4 2015Q4
Aggregate 337.9 411.6 562.1 649.2
Investment grade 239.1 289.4 379.8 466.8
General commercial 98.8 122.2 182.3 182.4
Source: CoStar
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