Investors Weigh In on Outlook for 2012
U.S. investors should prepare for
commercial real estate’s sluggish growth rate to continue in 2012, according to
the 33rd annual Emerging Trends in Real Estate® 2012, a joint report from PricewaterhouseCoopers and the Urban
Land Institute that surveys 950 commercial real estate industry executives.
Prevailing economic woes and a lack
of employment opportunities are key factors impacting real estate market growth.
“The hard reality is businesses have learned they can increase profits with
less space,” according to the report. While the dour U.S. employment outlook is
preventing occupancy increases in the office market, the related sluggishness
in consumer spending is hampering retail and industrial occupancies and rents. “Job
creation is clearly the critical ingredient for a sustained recovery in
commercial real estate and the market participants we surveyed uniformly
struggled to identify new employment engines,” said Mitch Roschelle, a partner
in PWC’s U.S. real estate advisory practice.
While next year will see an
increased supply of for-sale properties, buyer interest may diminish due to
economic uncertainties, survey respondents said.“In 2012, investors
expect pricing to level off in the top markets and overall buy sentiment will
subside, selling appetites will increase, and more owners will hold until the
economy untracks. This is part of the new normal as investors are coming to
grips that they may not be selling for more than they paid,” Roschelle noted.
Key sentiments for 2012 among the
survey participants include:
- Investors should concentrate on the few markets that
are showing hiring and leasing gains.
- Top assets in 24-hour gateway cities dependably
outperform because they lie on important global commercial routes and attract
money from all over the world.
- Employment upticks are most likely in gateways and markets
that rely on energy, high-tech, and healthcare-related industries, as well as
universities and government offices.
- Look for value-add opportunities in class B
properties in good infill markets that have been overlooked in recent years.
- Property owners should lock in long-term
fixed-rate financing on assets while rates remain attractive.