Industry Report: Slower But Steady CRE Market in 2017

The Urban Land Institute’s most recent commercial real estate survey has revealed the CRE market’s anticipated trajectory. CRE has benefitted from six consecutive years of growth, but the experts polled by ULI predict that it will taper off by 2017. The slower growth in property prices and rental rates won’t be dangerous, though, as survey respondents said that “better-than-average” operating fundamentals in most property types would still be seen.

The semiannual ULI Real Estate Consensus Forecast, based on a survey of 51 leading real estate economists and analysts, was less bullish compared with the previous survey six months ago. Sentiment in the survey taken during September and October points to ongoing but slower expansion of the U.S. economy over the next three years.

CRE investment sales volume, which peaked in 2015, is expected to decline gradually over the next three years, yet even at the diminished levels, expected annual deal-making volume in 2016 and 2017 will be eclipsed only by 2007 and 2015, respectively.

Industrial and warehouse was the only sector among the six major property types covered in the survey to log an increase in optimism from six months ago, with respondents expecting peaking occupancy but continuing warehouse rental rate growth through 2018.