UCLA Ziman Center: Slowdown Ahead for CRE

David Shulman is a senior economist at the UCLA Anderson Forecast.

LOS ANGELES—Commercial real estate is experiencing a “slow-motion slow down,” according to research from the UCLA Ziman Center for Real Estate and the UCLA Anderson Forecast that GlobeSt.com has obtained exclusively. Slowing job growth will catalyze the slowdown, along with decreasing demand, ecommerce, which will bring retail to a halt, and new supply that will deliver in 2017 and 2018. These disruptors, as the report calls them, will make commercial real estate a less attractive investment environment in the coming years.

“The underlying market fundamentals are weakening as employment growth will slow dramatically in 2017 and 2018 compared to recent years and supply is increasing,” David Shulman, senior economist at the UCLA Anderson Forecast, tells GlobeSt.com. “Although Brexit may have delayed the interest rate rise we have been looking for, higher rates are still in the cards for 2017 and 2018. Against a backdrop of record low cap rates, it is hard to see that there is much more room for commercial real estate prices to run.”