CBRE Sees Moderate Investment & Rental Growth for 2016 Global CRE Market

CBRE Group released its 2016 Global Real Estate Market Outlook this month, which anticipates that moderate economic growth with low interest rates are likely to continue in 2016, and expects a year of "volatile markets but steady economic growth." Highlights from sectors include:

Economy
Expect 2016 to be a year of volatile markets but steady economic growth. Consumers in the U.S., EU and many parts of Asia Pacific are spending gains from rising incomes, low interest rates and low oil prices, which should support GDP growth.

Capital Markets
Global commercial real estate investment markets are expected to remain active in 2016, but the pace of growth is anticipated to slow after six years of recovery and price appreciation.

Office
Most U.S. and European office markets are expected to tighten further in 2016 as demand for space is expected to outpace limited new development. However, Asia Pacific office markets will be more mixed.

Industrial
Robust demand from e-commerce and third-party logistics companies for warehouse and distribution space—including for smaller in-fill locations within major metros—will continue to reshape the industrial market.

"The current environment of variable but generally improving growth in the developed world, alongside low interest rates and low inflation, is very supportive of consumers and commercial real estate markets," said Richard Barkham, CBRE's global chief economist. "There are some risks for sure, including weakening sentiment due to volatile stock markets, rising interest rates in the U.S. and the U.K., financial stress in emerging markets and the slowdown of the Chinese economy. However, because consumers in the U.S., Europe and even China are in good shape, we think the global economy is strong enough to withstand these challenges and that the real estate and economic reality will be better than expected in most places in 2016."

To access the full CBRE report, click here. For more news and information visit Blumberg Partners.

CCRSI Price Indices Reflect Strong Year in the CRE Market

CoStar Group has released its year-end Commercial Repeat-Sale Indices (CCRSI), which showed double-digit price growth at the end of 2015 in all regional and property types across the U.S. commercial real estate markets. The CCRSI provides the market's first look at December 2015 commercial real estate pricing, noting that "improving CRE fundamentals, surging investor demand and liquid capital markets propelled the CCRSI composite indices upward in 2015. Demand for core property assets was especially strong." An excerpt from the summary follows:

December transaction activity remained true to its seasonal pattern observed over the last several years, spiking in the final month of the year as investors raced to close transactions prior to year-end. The December composite pair volume of nearly $18 billion was the highest monthly total on record, helping lift total 2015 volume to $128.3 billion, a 26.2% increase from the previous peak reached in 2014.

While pricing in core U.S. markets set records in 2015, investors moving out on the risk spectrum in search of higher yields resulted in equally strong sales activity in non-core markets and property types, as reflected in the equal-weighted U.S. Composite index. Heavily influenced by lower-value properties typical of those in secondary and tertiary markets, the equal-weighted U.S. Composite Index rose 12.6% in 2015 and is now within 3.4% of its previous high water mark.

To review the CCRSI and accompanying graphs, click here. For more news and information visit Blumberg Partners.

CBRE Says US a Top Target for Asian Investment

A new report from CBRE Capital Markets indicates that activity from Asian outbound commercial real estate investment has picked up in the United States, with research from the company showing that numbers surged to $8.6 billion in the first quarter of 2015. Russell Ingrum, Vice Chairman, CBRE Capital Markets, commented: "The U.S. firmed as a favorite investment destination for Asian investors, weighted with the closing of some high profile trophy deals. Asian investors are also seeking assets across the size, quality and risk spectrum. We saw strong demand from Chinese-based developers in the lower price brackets particularly along the West Coast. This economically vibrant area is particularly attractive due to its proximity to Asia and its familiarity to investors – there is a large Asian population and many investors went to school in this part of the world, have friends or relatives, or vacation here."

"Asian outbound investment enjoyed a strong start as a number of key deals stretched into the quarter, but we also saw under bidders moving on to alternative deals that kept the numbers buoyant," added Marc Giuffrida, Executive Director, CBRE Global Capital Markets. "Based on our work levels, we expect to see growing interest in opportunities within Germany, while in UK regional areas this could be in office, retail and logistics. They are being drawn by the higher real-time yields, and we are now seeing rental growth. As growth is coming back to Europe, we foresee opportunities in commercial development as an alternative to buying core office buildings. Perhaps the most interesting area for growth is underway in the alternative space such as student housing, as well as health and aged care. The latter are two strategic areas where given the rapid shift in elderly demographics in Asia and around the world; we can expect the acceleration of patient capital providers from insurance groups and conglomerates."

For more news and information visit Blumberg Partners.

Fitch Ratings Shows Fewer CMBS Due in 2012

Fitch Ratings has released their latest finding on the U.S. commercial mortgage backed securities (CMBS) sector with some encouraging news for the coming year as fewer loans are coming due in 2012. In transactions rated by Fitch, approximately 1,200 commercial mortgage loans totaling $17.3 billion are scheduled to mature in 2012, representing a sizeable drop compared to 2,000 loans totaling $22.5 billion that matured in 2011. The largest concentration of maturing loans in 2012 will come from loans secured by office properties, representing 38% of impending maturities reported the Wall Street Journal.

Fitch continues to expect the majority of loans to payoff at maturity despite the short term volatility of the capital markets. "Most maturing loans, particularly those from earlier vintages, benefit from stable performance and years of scheduled amortization, which make them more easily financeable in today's market," said Adam Fox, Senior Director at Fitch Ratings. The most challenging loans to refinance are those that were originated in 2007, the peak of real estate values. "Borrowers will likely need to contribute additional equity to secure financing for five-year loans."

For more news and information visit Blumberg Capital Partners.