From ULI’s UrbanLand Magazine, here are the Top 10 Commercial Real Estate Trends for 2012:
- Foreign investment: “The U.S. commercial real estate market continues to draw foreign investor interest…”
- Soft economy: “Continued slow macroeconomic growth will potentially stem commercial real estate expansion. Successive quarters of positive gross domestic product (GDP) growth remain below expectations…”
- Favorable fundamentals: “Commercial real estate fundamentals are benefiting from favorable absorption-completion dynamics.” (i.e. a record-low amount of construction is creating greater absorption, driving demand.)
- Maturing debt: An uptick in loan restructurings plus improved property fundamentals has decreased commercial real estate loan delinquencies. However… The high level of maturing debt remains a significant barrier to recovery.”
- Revival of CMBS: Though CMBS issuance has increased significantly since 2009, “this recovery has potentially stalled due to credit-market volatility.”
- Robust REITs: “REITs are well positioned going forward due to … market dynamics and improvements in property fundamentals.”
- Ample dry powder: “Dry powder,” the term for unused reserve capital, could play a large role in 2012′s real estate market, since a “significant amount of capital raised has yet to be deployed.”
- Distressed Transactions: “Distressed assets are close to a peak, but with an estimated $183 billion in troubled assets, transaction opportunities still exist.”
- Prolonged foreclosures: ”Some key measures of the real estate industry’s health have yet to recover, particularly in housing.”
- Stricter underwriting: Especially when it comes to residential real estate loans.
(Note that everything in quotes comes from UrbanLand’s article.)
These predictions, which UrbanLand drew from Deloitte LLP‘s market analysis for 2012, demonstrate how the recovering U.S. real estate market remains a mixed bag. Certainly, there are some very positive predictions here, such as the uptick in CMBS activity and distressed transactions–both signs of renewed health in the CRE sector–but there are also predictions of more of the same. The lackluster economy, scarcity of funding for new construction and developments, and constricted underwriting show that we’re a far cry from the pre-08 boom years.
The article from which I drew this list was actually published in December of 2011, so we have the benefit of hindsight to a certain extent. However, we’re less than halfway through the year. You never know. An unforseen event or economic condition could spring up to counter the trends we’ve been seeing so far. If that happens, let’s hope it’s for the better.