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Economists reveal real estate sector projections

On Behalf of | Oct 8, 2015 | Commercial Real Estate

Kansas investors may be interested in the latest real estate trend projections issued by the Urban Land Institute Center for Capital Markets and Real Estate. Overall, economists are less optimistic about global growth and stability than they were six months ago. However, the U.S. market is expected to remain solid for at least the next three years.

For its semiannual review, ULI surveyed 48 real estate economists in August and September. The analysts believe the real estate capital markets are strong, with commercial real estate transactions predicted to take in an average of $503 billion over the next three years. Commercial real estate prices are expected to rise by 6.8 percent annually, according the Moody’s/RCA Index.

The hotel industry is thriving and is projected to see gains in average revenue per available room of around 6 percent between 2015 and 2017. Commercial mortgage-backed security issuance is expected to jump to $140 billion in 2017, which is well above its 20-year average of $71 billion. However, experts predict it will stay below the pre-global financial crisis peak of $229 billion.

On the downside, economists are concerned that retail occupancy rates, real estate investment trust returns and housing starts will likely fall below their long-term averages. Retail vacancy rates are projected to stay above average, but vacancy rates in other sectors are expected to come in below their long-term averages. Meanwhile, the single-family housing sector has experienced an observable increase in vacancies over the last six months.

Kansas investors interested in commercial development may benefit by consulting with an attorney. Legal counsel could provide essential guidance during contract negotiations and closings.