Continued significant improvement can be expected in both the commercial real estate and housing sectors, according to the semi-annual forecast from the
The outlook, which represents the median consensus from a survey of 38 of the country's top real estate economists and analysts, is "very optimistic," said Howard Roth, global and Americas director of real estate at Ernst & Young, "considerably more so" than the previous ULI poll conducted in September.
Participants expect transaction volume in commercial real estate to rise steadily, from $290 billion last year to $310 billion this year, $340 billion in 2014 and $360 billion in 2015. Just four years ago, at the bottom of the recession, only $60 billion in commercial properties changed hands.
In what ULI senior vice president Dean Schwanke called "another good sign," the issuance of commercial mortgage-backed securities is predicted to leap nearly 50% this year alone, from $48 billion in 2012 to $70 billion in 2013. CMBS issuances, a key source of funding for income-producing properties, are expected to hit $80 billion next year and $100 billion the year after that. In 2009, only $3 billion in CMBS were issued.
Participants also are looking for strong growth in the housing sector through the remainder of this year and the next two. "This is where we see some of the most dramatic changes, and lots of optimism," Schwanke said during an hour-long press briefing.
The expectation is for 700,000 single-family housing starts this year, 900,000 in 2014 and 1.013 million in 2015. Just 535,000 houses were started last year. Also, prices are expected to rise 6% this year, 5.3% in 2014 and 5% in 2015. Despite the moderation, that is well above previous predictions.
These and other projections are based on a generally favorable outlook for the economy, with steady improvement anticipated in both growth and employment.
"When it comes to the economy, we see a lot of underlying strength," said Suzanne Mulvee, director of research at Retail, Property and Portfolio Research in Boston and one of the survey participants.
Others agreed. "The economy really wants to go faster," said Kevin Thorpe, chief economist at Cassidy Turley, a commercial real estate company in Washington. "Household balance sheets are very clean and ready to go forward," added Craig Thomas, vice president of market research at AvalonBay Communities, a major apartment developer headquartered in Arlington, Va.
About the only thing slowing growth is the federal government's "fiscal instability," Thorpe ventured. But otherwise, he said, "we're starting to morph into a really strong economy."
