Commercial Investment Real Estate September/October 2017 | Page 10
MARKET
TRENDS
ULI Forecasts Moderate Growth for CRE Industry
Annual CRE transaction sales volume peaked in 2015 at
$547 billion, declined to $489 billion in 2016, and is expected
to decline to $450 billion in 2017 and 2018. However, that
volume remains well above the long-term average.
Vacancy rates for industrial, office, and retail are expected to
improve in 2017, but stay flat for 2018 and 2019. Multifamily,
however, is expected to rise to a 5.2 percent vacancy in 2017.
Source: ULI Center for Capital Markets and Real Estate
Briefly Noted
Hospitality — Despite the
forecasts to the contrary,
demand for hotel rooms
grew by 2.8 percent YOY in
Q1 2017 compared to Q1
2016, according to CBRE.
Accelerating growth
nationwide pushed up
occupancy to 61.1 percent
in Q1 2017, the highest
level since STR began
tracking this data in 1987.
Some 53 of 60 markets
had positive growth for
hotel rooms. The top three
growth markets were the
geographically widespread
Albany, N.Y., New Orleans,
and Salt Lake City.
Demand was highest
among upscale hotels,
with 5.8 percent growth.
Industrial — Absorption
of 53.8 million sf in Q1 2017
lifted the industrial market
to the highest rate in this
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September | October 2017
economic cycle and much
higher than 40.6 msf during
the last two economic
cycles, according to
Cushman & Wakefield. The
vacancy rate for industrial
continued its fall by 20
basis points from Q4 2016
to 5.3 percent. “Online
sales continue to drive
significant requirements for
new industrial space across
the country,” says John
Morris, executive managing
director of logistics and
industrial services for the
Americas at C&W.
Multifamily — While
rents ticked up in May
2017, the rate of growth in
multifamily continued its
slide, according to the Yardi
Matrix. The average U.S.
monthly rent was up $4 to
$1,316, based on data from
121 markets. An oversupply
of apartments nationwide
is lowering demand.
The difference in growth
between lifestyle renters
and renters-by-necessity
continued. Nationally,
lifestyle rents are flat YOY,
while RBN rents have
increased by 2.6 percent.
Yardi Matrix expects
multifamily to peak in
2017, although it will remain
relatively robust in 2018
and 2019.
Office — While absorption
in office is cooling off, the
record streak of positive
occupancy continues
across the nation,
according to Cushman &
Wakefield. “The economy
continues to add jobs, and
most U.S. markets remain
fundamentally healthy,”
says Kevin Thorpe, global
chief economist at C&W.
“But the combined
pressures of slower job
creation and rising office
construction is beginning
to place upward pressures
on vacancy rates,
particularly for larger U.S.
cities.”
Retail — Value brands
continue to outpace big-
box stores, driven primarily
by a fundamental shift
among consumers toward
lower prices, according
to CBRE. Brands like TJ
Maxx, Ross, and Stein
Mart are relatively insulated
from e-commerce growth
compared to mid-range
brands because consumers
enjoy the bargain-hunting
factor in retail shopping.
Overall, many experts are
seeing effective adaptation
from many retailers to meet
shifts in consumer demand.
COMMERCIAL INVESTMENT REAL ESTATE
3
Commercial real estate prices are projected to grow at
relatively subdued and slowing rates: 5 percent for 2017;
3.5 percent for 2018; and 3 percent for 2019.