Analysts Bullish on US CRE in 2015

NEW YORK CITY—The annual commercial real estate forecast report by Situs, RERC, Deloitte, and the National Association of Realtors points to continued increases in commercial real estate value and pricing this year.

The report entitled “Expectations & Market Realities in Real Estate 2015—Scaling New Heights” states that while challenges remain, the prevailing trends of strong demand, improving real estate fundamentals, and continued low interest rates that buoyed the markets in 2014 will continue for the near term.

“We are at an inflection point with respect to the price and value of commercial real estate,” says Kenneth Riggs, RERC president. “Thus far, price and value seem to be balanced, but no one can guarantee that these recent high real estate prices and values are sustainable. But for now, many investors are willing to pay extremely high prices for the value that commercial real estate brings, and it appears that broad market prices and values have room to increase for another 12 to 18 months.”

Matthew Kimmel, principal and US real estate services leader at Deloitte Transactions and Business Analytics LLP, says that the US real estate market is one of the preferred destinations for investment capital as compared to the rest of the global economy.

“Not only does commercial real estate provide a sense of safety, it is transparent, tangible, and can serve as a hedge against inflation on a long-term basis. On a risk-adjusted return basis in certain North American markets—and especially in the US—performance has exceeded other developed global CRE markets.”

Lawrence Yun, Ph.D., chief economist with NAR, adds that a faster-growing US economy and the stronger job growth of late is the best prescription for the commercial real estate market. “More jobs mean increased demand for office, industrial, retail, and other commercial real estate sectors," he says. "Add to that the relief that consumers are receiving from lower fuel costs, and we can expect that investors will look further beyond the primary markets and into late-recovering secondary market for real estate investments with good value and opportunity.”