New Data Shows Positive Outlook Through 2014
Several positive indicators point to a favorable outlook for commercial real estate through 2014, according to the PwC Real Estate Barometer in the 1Q11 PwC Real Estate Investor Survey. By analyzing historical and forecast stock data, the barometer measures inventory changes within the office, industrial, retail, and multifamily sectors over time in relation to the four stages of the real estate cycle.
“As investors become more confident about the long-awaited recovery of the industry, they are eager to get deals done. This bodes well for the industry as the volume of capital chasing deals is expected to increase in all sectors as investors work to deploy capital before interest rates rise, overall cap rates increase, and the industry shifts more in favor of sellers,” says Mitch Roschelle, partner and U.S. real estate advisory practice leader for PricewaterhouseCoopers.
With constrained supply and decreasing vacancy, the majority of the office sector will be in recovery by year-end, with 86.2 percent of the sector rising from the market’s bottom by year-end 2012, according to the report. Despite the nationwide rebound, hard-hit markets such as Chicago, Las Vegas, Los Angeles, and Tampa, Fla., will remain depressed through 2012.
Inconsistent consumer spending and inflation concerns will keep about 76.6 percent of the retail market in recession through 2012, with a more widespread recovery expected by year-end 2013. A few isolated markets such as Long Island, N.Y., and Nashville, Tenn., may see recovery by 2012, faring better than the national trend.
Availability rates for the industrial sector are expected to peak in 2011 as tenant demand strengthens due to the improving economy. As a result, the industrial market is expected to rebound in 2011 and 2012. As imports and exports increase, a good share of the industrial market will enter the expansion phase in 2013 and 2014, with the exception of a few lagging markets such as Tampa, Akron, Ohio, Cleveland, and Minneapolis.
The multifamily sector is recovering well ahead of the other sectors. As tighter lending restrictions limit home-buying opportunities, housing demand will push approximately 30.2 percent of the market into expansion through 2014. New Orleans and Syracuse, N.Y., are not expected to experience near-term gains.