Commercial real estate, already high on the radar screens of investors trying to balance relative safety and returns, is expected to continue to increase in value and pricing during 2015, according to the authors of Expectations & Market Realities in Real Estate 2015—Scaling New Heights, an annual forecast report released by RERC, LLC a Situs company (RERC), Deloitte, and the National Association of REALTORS® (NAR).
These organizations have drawn on their respective capabilities to examine the economy, capital markets, and commercial property markets; thoroughly assess and analyze the research; and offer an objective outlook for commercial real estate for the year ahead. Findings indicate that while challenges remain, the U.S. commercial real estate market has been buoyed by strong demand, improving real estate fundamentals, and still-low interest rates. These trends are expected to continue for the near term.
“We are at an inflection point with respect to the price and value of commercial real estate,” stated Kenneth Riggs, RERC president. “Thus far, price and value seem to be balanced, but no one can guarantee that these recent high real estate prices and values are sustainable. For now, many investors are willing to pay extremely high prices for the value that commercial real estate brings, and it appears that broad market prices and values have room to increase for another 12 to 18 months.”
“Compared to the rest of the global economy, the U.S. real estate market is one of the preferred destinations for investment capital. Not only does commercial real estate provide a sense of safety, it is transparent, tangible, and can serve as a hedge against inflation on a long-term basis,” noted Matthew Kimmel, principal and U.S. real estate services leader at Deloitte Transactions and Business Analytics LLP. “On a risk-adjusted return basis in certain North American markets — and especially in the U.S. — performance has exceeded other developed global CRE markets.”
Lawrence Yun, Ph.D., chief economist with NAR, notes that a faster-growing economy and the stronger job growth we have seen recently is the best prescription he could provide for the commercial real estate market. “More jobs mean increased demand for office, industrial, retail, and other commercial real estate sectors. Add to that the relief that consumers are receiving from lower fuel costs, and we can expect that investors will look further beyond the primary markets and into late-recovering secondary market for real estate investments with good value and opportunity.”
“Broadly speaking, commercial real estate has more than recovered the value it lost during the recession, and whether one is using equity or debt investment capital, the investment environment will likely remain very attractive as long as U.S. Treasury rates and interest rates remain low,” said Constantine Korologos, managing director, Situs. “We expect investors to continue to purchase real estate, for prices to continue to increase, and for values to continue to chase prices. And for investors, that is a pretty good place to be.”
To download the report please click here: http://situs.com/news/expectations-and-market-realities-in-real-estate-2015-scaling-new-heights