Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/700533
July | August | 2016 CCIM.com $217 $370 $430 $573 $175 $69 $149 $234 $299 $363 $432 $534 $525 $500 $475 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Billions of Dollars 15-Year Avg. ($279) Sources: 2001-2015, Real Capital Analytics; 2016-2018, ULI Consensus Forecast. Note: The previous ULI Consensus Forecast (released in September 2015) projected $510 and $500, respectively, for 2016 and 2017. Actual Forecast Sources: 1996-2015, Commercial Mortgage Alert; 2016-2018, ULI Consensus Forecast. Note: The previous ULI Consensus F orecast (released in September, 2015) projected $130 and $140, respectively, for 2016 and 2017. $93 $167 $198 $229 $12 $3 $12 $33 $48 $86 $94 $101 $85 $100 $100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Billions of Dollars 20 Year Avg. ($76) Actual Forecast include a strong dol- lar, which is negatively affecting export vol- umes. Vacancy rates for wa rehouse a nd distribution space are expected to decline 40 basis points this year to 10.2 percent, according to Reis. During 1Q16, effective rents increased to an average of $4.57 per square foot, which is up 0.6 percent com- pared to 4Q15 and 2.1 percent over 1Q15. Industrial has bene- fited from a rise in retail sales and growth in e-commerce, which drives demand for storage and distribution facilities. In addition, the sector could get a bigger boost from a rebound in home build- ing. New home construction creates demand for items ranging from flooring and windows to appliances and furniture, which will help the manufacturing sector and also buoy warehousing demand. Factors to watch in the second half of 2016 and into 2017 will be a spike in new industrial supply. "ere is a lot of new supply coming online, and it is very possible that that supply, particularly to deal with online sales, is going to outrun the demand next year," Linneman says. New construction during first quarter totaled 16.9 million square feet following the 19.3 million sf that was completed in fourth quarter, according to Reis. Office. Office will continue to see a solid increase in demand and steady absorption, with more activity in the best CBD and best suburban locations. Vacancies dropped 20 bps in 1Q16 to 16.0 percent, according to Reis. e firm is predicting that vacancies will remain relatively flat this year with a slight decline to 15.9 percent by year-end. Although 1Q16 was slower for office leas- ing, it follows 23 straight quarters of positive net absorption, notes Havsy. He expects posi- tive net absorption in the office market this year, although the pace of that absorption is slowing. One reason for that is that the market is getting tighter. "Companies that are look- ing for a particular type of space or a particu- lar location may have to work a little harder, because there isn't as much choice," he says. e lack of new construction has been a big help in an otherwise tepid office market recovery. Roughly 6 million sf of new office space came on line in 1Q16, which is slightly less than the 6.2 million sf that was com- pleted in 1Q15, according to Reis. However, those deliveries will increase in 2017, and that is already starting to affect rents as tenants commit to leases in those new buildings. Multifamily. By the numbers, mu ltifa mi ly remains a stellar per- former with vacancies below 5 percent. Yet the building boom occurring in some metros is starting to create some soness in the market with new sup- ply exceeding demand, particularly in the high- end, class A segment of the market. Vacancy rates ticked slightly higher to 4.5 percent in 1Q16, and Reis is predicting that rates will rise another 20 bps this year to 4.7 percent. Commercial Mortgage-Backed Securities Issuance CRE Transaction Volume