2017 has been a big year for change, and it looks like the future has more to offer. Rents have increased this year, and many firms have invested in infrastructure. Real estate economists have remained optimistic when thinking of the future economic growth. Looking at The Urban Land Institute’s survey on economic forecast, we see that there are several benefits for the real estate market. Today, we bring you 5 future economic growth trends that we’ll see in the next three years!
Decreasing Net Job Growth
The forecast says that net job growth will decrease by half a million, from 2 million to 1.5 million by 2019. Analysts have predicted that net job growth should average 1.2 million in the long-term. Additionally, it is expected that the unemployment rate in the U.S. will drop to 4.2% next year, which is the lowest it has been in years.
Steady Rent Growth
Despite the volatility in rent this year, prices are expected to be steady for apartments and offices. On average, the increases will most likely stay under 3% over the next three years. On the other hand, hotels beat out other sectors and are at the top of the list. There’s some uncertainty in this industry due to rising labor costs. Hotel rents are expected to increase 2.7% revPAR next year.
Increasing Commercial Real Estate Prices
The CRE market is expected to peak soon! Prices are expected to go up on average by nearly 4% each year over the next three years. Not a shocker, but retail will decrease, while prices of industrial assets are expected to hike by nearly 11%.
Real Estate Transaction Volumes Declining
Last year saw a decline in investment sales, and it looks like the future is not too bright either. Real estate transactions volumes will fall to $450 billion by the end of this year, which is a $46 billion decrease from last year. The forecast for the next two years show consistent declines as well, with $427 billion in 2018, and $414 billion in 2019. Potentially, those numbers can change and get even lower.
Vacancy Rates Likely to Rise
About 52 out of 79 metro areas have shown vacancy increases, which leads us to believe that rising vacancies will continue. Specifically, New York is expected to experience a significant surge in vacancies. On average, apartment vacancies will see a small growth. Industrial assets most likely will not see a significant growth or decline. Meanwhile, vacancies in retail will increase over the next few years.