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.

NAR'S Outlook on CRE Positive but Moderating

The National Association of Realtors® (NAR) quarterly commercial real estate forecast was released today, which reflects continued improvements in the commercial real estate markets, though at a slower pace. Lawrence Yun, NAR chief economist, said NAR's latest Commercial Real Estate Outlook shows that fundamentals are still on an uptrend. "Growth in commercial real estate sectors continues at a moderate pace from a very slow pace of absorption, despite job additions to the economy. Companies appear hesitant to add new space," he said. Highlights from the office market follow:

Vacancy rates in the office sector should decline from an expected 15.8% in the first quarter of this year to 15.6% in the first quarter of 2015.

The markets with the lowest office vacancy rates presently (in the first quarter) are New York City, with a vacancy rate of 9.5%; Washington, D.C., at 10.2%; Little Rock, Ark., 11.6%; Birmingham, Ala., 12.7%; and San Francisco and Nashville, Tenn., at 12.8% each.

Office rents are projected to increase 2.3% in 2014 and 3.2% next year. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is likely to total 44.6 million square feet this year and 50.0 million in 2015.

For more news and information visit Blumberg Capital 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.

NAR Sees Modest Improvement in CRE Market

The National Association of Realtors (NAR) has released its latest observations on the conditions of the real estate markets, the Commercial Real Estate Outlook, and noted that commercial real estate vacancy rates are flat with moderate projections for growth and modest improvements expected over the coming year. NAR forecasts vacancies to decline 0.3 percentage point in the office sector, 0.6 point in industrial real estate, 0.7 point in the retail sector and 0.9 percentage point in the multifamily rental market.

"Disappointing economic growth in recent months means a slower recovery for most of the commercial real estate sectors, although multifamily housing continues to benefit from pent-up demand resulting from an abnormal slowdown in household formation in recent years," said Lawrence Yun, NAR chief economist. "Many young people, who normally would have struck out on their own from 2008 to 2010, had been doubling up with roommates or moving back into their parents' homes. However, they've been entering the rental market as new households in stronger numbers this year. As a result, apartment vacancy rates are declining and rents are rising at faster rates."

Particular to the office market, NAR observed:

- Vacancy rates in the office sector are forecast to fall from 16.6% in the third quarter of this year to 16.3% in the third quarter of 2012.

- The markets with the lowest office vacancy rates currently are Washington, D.C., with a vacancy rate of 8.6%; New York City, at 10.1%; and Long Island, N.Y., 13.0%.

- Office rents are expected to rise 0.8% in 2011 and another 1.5% next year. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be 28.3 million square feet this year.

For more news and information visit Blumberg Capital Partners.

Latest Beige Book Comments on CRE Conditions

The latest Beige Book, prepared at the Federal Reserve Bank of New York, summarizing comments received from businesses and other contacts outside the Federal Reserve, was released this week. As BBC notes, growth appeared to slow in several regions across the US in May, with the manufacturing sector notably sluggish, which the Fed blamed on the disruption to supply chains from Japan's earthquake. An excerpt from the real estate portion of the report:

Commercial and industrial real estate markets have generally been steady since the last report, though there have been scattered signs of a pickup. Commercial leasing markets showed modest signs of improvement in the Richmond and San Francisco Districts. Boston and Dallas noted some firming in property sales markets, but Kansas City reported declines in prices for office buildings. Non-residential construction, though widely reported to be at very low levels, rose modestly in the Boston, Chicago, Minneapolis, and Dallas Districts, though Chicago noted that public sector projects are becoming smaller. Cleveland observed a pickup in industrial and high-end commercial development but a pullback in healthcare-related projects. Richmond reported some pockets of strength in the retail market. More broadly, contacts in a number of Districts expressed a general sense of optimism about the outlook for the second half of 2011.

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