6 Commercial Real Estate Investing Predictions for 2013
Commercial Real Estate Broker · Wakefield, MA · Member since 2011 · 60 posts · 21 votes
I just posted a new pdf report entitled "6 Commercial Real Estate Investing Predictions for 2013 and Beyond" and thought you'd like a quick summary of what's inside.
1. Tax Changes Gives Investors Pause, Causing More Conservative Underwriting
2. Apartment Investing Remains Hot
3. Retail Recovers and Resizes
4. The Land Market Heats Up for Home Building
5. Office Demand Realigns with New ?Work Trends
6. Industrial Holds Steady with Modest Gains
What do you see happening this year?
If you look at the last major down cycle in commercial real estate, the RTC days, that down cycle lasted 7 years. Arguably, it was caused by loose lending practices, and over-development.
Fast forward 16 years to late 2006. Add seven years for history's sake, and one might erroneously assume we are coming out of the "down cycle. "
Then, lets add for a few additional culprits: easy money (our old pal), over development (another old pal), consumer confidence, global markets, technology, emerging markets, government regulation, consumer paradigm shifts, unemployment, aging infrastructures, and political paralysis, to name a few; and we can easily argue for 8, 9, 10 years of down cycle.
We are in our 7th year of down. Most markets are seeing flat growth, big boxes are becoming smaller, office building demand is weak, mom and pops are going away, or gone....and only the strong are surviving.
Sure, one can point to Texas and other select states and tout their employment and growth records; but, they've got shale.
4 more years of government growth? Higher taxes? Higher capital gains? Internet sales vs. sticks and bricks? Virtual offices? Regional warehousing for distribution? Higher fuel costs?
My humble prediction is 2015 will mark the start of a commercial upturn for the small and medium small investors. That's not too far away. There's a bunch of money already in play. Patient money.
We've been down so long, everything is starting to look like up.
Jeremy Cyrier,
I'm not too involved in Commercial aspects although I have been contemplating a few commercial investments.
I predict some slow growth or possible appreciation in commercial.
-Steven
If you look at the last major down cycle in commercial real estate, the RTC days, that down cycle lasted 7 years. Arguably, it was caused by loose lending practices, and over-development.
Fast forward 16 years to late 2006. Add seven years for history's sake, and one might erroneously assume we are coming out of the "down cycle. "
Then, lets add for a few additional culprits: easy money (our old pal), over development (another old pal), consumer confidence, global markets, technology, emerging markets, government regulation, consumer paradigm shifts, unemployment, aging infrastructures, and political paralysis, to name a few; and we can easily argue for 8, 9, 10 years of down cycle.
We are in our 7th year of down. Most markets are seeing flat growth, big boxes are becoming smaller, office building demand is weak, mom and pops are going away, or gone....and only the strong are surviving.
Sure, one can point to Texas and other select states and tout their employment and growth records; but, they've got shale.
4 more years of government growth? Higher taxes? Higher capital gains? Internet sales vs. sticks and bricks? Virtual offices? Regional warehousing for distribution? Higher fuel costs?
My humble prediction is 2015 will mark the start of a commercial upturn for the small and medium small investors. That's not too far away. There's a bunch of money already in play. Patient money.
We've been down so long, everything is starting to look like up.
We have been in a down market for a long time when it comes to the commercial sector of real estate. The 1st sign of recovery in the commercial sector usually is multi family housing which has already begun as vacancies are lower and rents are beginning to climb. This would most likely be an indication that the recovery in this sector of the market is beggining to occur.
The current structural problems with the Euro and the fiscal cliff in the US are probably the biggest things detracting from a take off in the commercial market as many in business takes a wait and see approach.
I see maybe late 2014 or 2015 being turn around and increase already in the commercial sector activity surrounding residential apt investing. Interest rates are low now and my guess is they will stay low for a while but its not a guarantee. If rates make a jump of more then 2 points I would put off my increase in activity in this market for another 2 years to 2017. Just because we have population growth doesnt mean we can be so bullish in the market place when incomes are stagnant and taxes are on the rise. While I am bullish in the long term I think short term growth is very slow and wont take off for several years if it does take off.
Today and in the near future new building will probably not completely fill demands and over time that upward price pressure will build as it is beginning to in the apartment markets already.
Price Water Cooper thinks things are already beginning to heat up.
Shilling offers information to suggest that recovery in this sector has begun years ago. I read a number of reports mostly related to Strategic Outlooks and here are a few numbers if you can see my chart below without lines.. Try to match up year with column below Im sorry they arent in perfect order.
Property Market Fundamentals
U.S. Vacancy Rate Trends
Actual Projected
2008 2009 2010 2011 2012 2013 2014 2015 2016
Apartment 6.8% 8.2% 6.7% 5.3% 4.5% 4.1% 4.0% 4.8% 5.4%
Industrial 11.8% 14.3% 14.3% 13.5% 12.3% 11.1% 10.3% 10.2% 10.2%
Office 14.2% 16.6% 16.5% 16.1% 15.5% 14.2% 12.6% 12.0% 12.3%
Retail 8.7% 10.3% 10.7% 10.8% 10.3% 9.6% 9.3% 9.0% 9.1%
Sources: REIS, CBRE-EA (History) and RREEF Real Estate (Forecast).
As of March 2012.
All property market sectors are firmly into recovery, but each sector is at a different stage of
the cycle. Apartments have completed their second year of solid rent growth along with a
dramatic rise in occupancy and income. As a matter of pattern the office retail and industrial follow suit.
Hope this helps. One of my favorite sources www.rreef.com
Shiller is another one.