Commercial property transaction volume is expected to increase by nearly 50% in the next three years, and the issuance of commercial mortgage-backed securities (CMBS) is expected to more than double, according to a new Urban Land Institute (ULI) survey of 38 leading real estate economists and analysts.
According to the newly released ULI Real Estate Consensus Forecast, institutional real estate assets and real estate investment trusts (REITs) are expected to provide returns ranging from 8.5% to 11% annually through 2014. The survey also forecasts that vacancy rates will drop between 1.2 and 3.7 percentage points for office, retail and industrial properties, and will remain stable at low levels for apartments, while hotel occupancy rates will likely rise.
Furthermore, rents are expected to increase for all property types, with 2012 increases ranging from 0.8% for retail to up to 5% for apartments.
The survey also looks at residential real estate, with forecasts of housing starts nearly doubling by 2014. The survey also predicts that home prices will begin to rise in 2013, with prices increasing by 3.5% in 2014.
The survey, which was conducted in late February and early March, is a consensus view and reflects the median forecast for 26 economic indicators, including property transaction volumes and issuance of commercial mortgage-backed securities; property investment returns, vacancy rates and rents for several property sectors; and housing starts and home prices.
‘Commercial real estate returns for institutional quality and REIT assets have performed very well in recent years, and this performance is expected to remain strong but trend lower over the next three years,’ says Dean Schwanke, executive director of the ULI Center for Capital Markets and Real Estate.
The full report is available online. (link)