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/870737
COMMERCIAL INVESTMENT REAL ESTATE 8 September | October 2017 T R E N D S MARKET Briefly Noted Hospitality — Despite the forecasts to the contrary, demand for hotel rooms grew by 2.8 percent YOY in Q1 2017 compared to Q1 2016, according to CBRE. Accelerating growth nationwide pushed up occupancy to 61.1 percent in Q1 2017, the highest level since STR began tracking this data in 1987. Some 53 of 60 markets had positive growth for hotel rooms. The top three growth markets were the geographically widespread Albany, N.Y., New Orleans, and Salt Lake City. Demand was highest among upscale hotels, with 5.8 percent growth. Industrial — Absorption of 53.8 million sf in Q1 2017 lifted the industrial market to the highest rate in this economic cycle and much higher than 40.6 msf during the last two economic cycles, according to Cushman & Wakefield. The vacancy rate for industrial continued its fall by 20 basis points from Q4 2016 to 5.3 percent. "Online sales continue to drive significant requirements for new industrial space across the country," says John Morris, executive managing director of logistics and industrial services for the Americas at C&W.; Multifamily — While rents ticked up in May 2017, the rate of growth in multifamily continued its slide, according to the Yardi Matrix. The average U.S. monthly rent was up $4 to $1,316, based on data from 121 markets. An oversupply of apartments nationwide is lowering demand. The difference in growth between lifestyle renters and renters-by-necessity continued. Nationally, lifestyle rents are flat YOY, while RBN rents have increased by 2.6 percent. Yardi Matrix expects multifamily to peak in 2017, although it will remain relatively robust in 2018 and 2019. Office — While absorption in office is cooling off, the record streak of positive occupancy continues across the nation, according to Cushman & Wakefield. "The economy continues to add jobs, and most U.S. markets remain fundamentally healthy," says Kevin Thorpe, global chief economist at C&W.; "But the combined pressures of slower job creation and rising office construction is beginning to place upward pressures on vacancy rates, particularly for larger U.S. cities." Retail — Value brands continue to outpace big- box stores, driven primarily by a fundamental shift among consumers toward lower prices, according to CBRE. Brands like TJ Maxx, Ross, and Stein Mart are relatively insulated from e-commerce growth compared to mid-range brands because consumers enjoy the bargain-hunting factor in retail shopping. Overall, many experts are seeing effective adaptation from many retailers to meet shifts in consumer demand. ULI Forecasts Moderate Growth for CRE Industry Source: ULI Center for Capital Markets and Real Estate everythingpossible/Getty Images Annual CRE transaction sales volume peaked in 2015 at $547 billion, declined to $489 billion in 2016, and is expected to decline to $450 billion in 2017 and 2018. However, that volume remains well above the long-term average. Commercial real estate prices are projected to grow at relatively subdued and slowing rates: 5 percent for 2017; 3.5 percent for 2018; and 3 percent for 2019. Vacancy rates for industrial, office, and retail are expected to improve in 2017, but stay flat for 2018 and 2019. Multifamily, however, is expected to rise to a 5.2 percent vacancy in 2017. 3