Commercial Real Estate Outlook Favorable Through 2014

A positive outlook for the overall economy, including housing and employment, is expected to drive up commercial transaction volume to $312 billion in 2014, according to the Urban Land Institute’s ULI Real Estate Consensus Forecast(pdf). The forecast reflects the opinions of 38 commercial real estate economists, including National Association of REALTORS® Chief Economist Lawrence Yun and CCIM Chief Economist Kenneth P. Riggs Jr., CCIM, CRE, MAI.

Commercial transaction volume -- if it were to reach $312 billion in 2014 would represent a 50 percent increase over current levels -- was one of several strong projections to emerge from the forecast. The consensus forecast projects CMBS issuances to reach $75 billion by 2014, marking a steep increase from the 2009 low of $3 billion. Rents for all property types are expected to increase during the next three years, ranging from 0.8 percent for retail to 5.0 percent for multifamily.

Total real estate investment trust returns is one of the few indicators that will trend downward over the next three years. After reaching returns of 28 percent in 2009-2010, REIT returns slowed to 11 percent last year and are expected to drop to 8.5 percent in 2014.

The consensus forecast was based on a strong outlook for the U.S. economy, including GDP climbing to 3.2 percent and unemployment falling to 6.9 percent in 2014. "While geopolitical and global economic event could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvements over the next three years," says Patrick L. Phillips, chief executive officer of ULI.