Commercial Real Estate Market in 2012

What can we expect in 2012 in the Commercial Real Estate Market? Although commercial real estate was relatively flat in 2011, we are expecting to see modest but stable growth in 2012 with vacancy rates slightly declining, the multifamily frenzy continuing, and foreign investors continuing to capitalize on attractive US opportunities. Although not a dynamic change for 2012, it certainly heads us in the right direction and sets us up for a strong 2013. Compared to the last couple of years in commercial real estate, I look forward with great anticipation to 2012!

Here are some thoughts from top economists:

Lawrence Yun, NAR chief economist, gives us a national perspective: “The commercial real estate market is expected to follow the general economy. “Vacancy rates are expected to trend lower and rents should rise modestly next year. In the multifamily market, which already has the tightest vacancy rates in any commercial sector, apartment rents will be rising at faster rates in most of the country next year. If new multifamily construction doesn’t ramp up, rent growth could potentially approach 7 percent over the next two years,”

Bob O’Brien, Vice Chairman and Partner, US Real Estate Services Leader at Deloitte and Touche, gives a global perspective: Hard on the heels of the United States’ economic recession and the simultaneous strengthening of emerging Asian and Latin American markets, the Commercial Real Estate (CRE) industry is seeing an increased focus on diversification into global CRE. While Asia Pacific (APAC) has emerged as a strong driver of global CRE growth, the U.S. continues to attract investments based on size and favorable risk-reward. In general, the U.S. CRE market appears to be on a gradual but uneven path to recovery, with increased capital availability, transactions, and improved fundamentals

Jones Lang LaSalle‘s offers highlights for 2012 National Commercial Real Estate Outlook:

  • Total investment transaction volume to increase by 15 to 20 percent to $190 billion in 2012 – a slower increase than the last two years.
  • Businesses will take real estate into greater consideration in 2012, focusing investments on efficiency and productivity. Additionally, businesses will consider corporate real estate as a greater contributor to corporate social responsibility initiatives in 2012, shifting investments from new construction toward retrofitting existing assets.
  • Global uncertainty, slow employment growth, and changes in space use will cause office space demand to slow. Commodity- and technology-rich markets, such as Texas, Denver and Northern California will lead demand growth.
  • Hotel demand is expected to continue to rise in 2012, but likely on a more cautious trajectory than in 2011, with private equity groups at the forefront of asset bidding.
  • Distribution hubs and ports will lead the industrial recovery in 2012.

All of us at Millridge Real Estate wish you a happy, healthy and prosperous New Year and will gladly help you with any of your real estate needs.

Tags: ,