ORLANDO—Commercial real estate's growth path is expected to veer into smaller markets in 2017, industry experts said Friday at a National Association of Realtors conference here. Attendees also heard from the Counselors of Real Estate on the top 10 emerging trends to watch next year, on both the residential and commercial sides.
Given the slow-growth economic environment, instability overseas and the probability of a rate hike by Federal Reserve next month, investors are expected to take a cautious approach in the months ahead, NAR chief economist Lawrence Yun said Friday at the Realtors Conference & Expo. As a result, Yun is expecting a modest decline in commercial property prices, especially for class A assets in larger markets.
“Prices in smaller markets should continue to climb with strong tenant demand and declining supply supporting growth,” Yun said. “As job creation continues, commercial real estate and vacancy rates will be stable across the country.”
K.C. Conway, SVP of credit risk management at SunTrust Bank, focused on the key commercial real estate sectors, investments and capital market trends. He told the NAR audience that the conditions supporting expansion in commercial real estate will remain strong as long as the Fed remains dovish on interest rates.
“Housing and consumer spending are the two components buoying the economy,” Conway said. “If the Fed increases short-term interest rates, both of these components will be affected, which could potentially lead to a recession.” However, he concluded, “While the global economy remains in trouble with high debt ratios, the general state of commercial real estate in the US remains strong due to high multifamily starts and renters occupying quickly.”
A comparable take on the US economy, and US commercial real estate, came from Scott Muldavin, 2017 chair of the Counselors of Real Estate, and Peter Burley, chair of the group's external affairs committee. Geopolitical and economic uncertainty, volatility in the energy markets and weaker trade volume all could slow domestic growth and lead to fewer job gains in the year ahead, they told NAR conference attendees. “The good news is that even with U.S. economic expansion at around 2%, the US is still outperforming other major countries around the world,” said Muldavin.
Burley pointed out that demographic shifts are poised to transform the real estate industry now that Millennials have surpassed Baby Boomers as the largest generation. With a growing share of Millennials now entering their mid-30s, an increasing number of them will be getting married and eventually having children.
However, Burley cited the lack of new supply coming onto the market, which has made buying a home more expensive. “Home prices have outstripped incomes and it makes it very challenging for Millennials looking to buy,” he said. “As a result, rental demand is expected to remain very strong.”
As it has for the past five years, the CRE recently issued a top 10 list of the issues and developments that will define the real estate industry in the upcoming year. This year's list is as follows: the changing global economy; debt capital market retrenchment; demographic shifts; densification/urbanization; the political environment; housing affordability and credit constraints; the disappearing middle class; energy; the sharing and virtual economy; and the rise of experiential retail.
ORLANDO—Commercial real estate's growth path is expected to veer into smaller markets in 2017, industry experts said Friday at a National Association of Realtors conference here. Attendees also heard from the Counselors of Real Estate on the top 10 emerging trends to watch next year, on both the residential and commercial sides.
Given the slow-growth economic environment, instability overseas and the probability of a rate hike by Federal Reserve next month, investors are expected to take a cautious approach in the months ahead, NAR chief economist Lawrence Yun said Friday at the Realtors Conference & Expo. As a result, Yun is expecting a modest decline in commercial property prices, especially for class A assets in larger markets.
“Prices in smaller markets should continue to climb with strong tenant demand and declining supply supporting growth,” Yun said. “As job creation continues, commercial real estate and vacancy rates will be stable across the country.”
K.C. Conway, SVP of credit risk management at
“Housing and consumer spending are the two components buoying the economy,” Conway said. “If the Fed increases short-term interest rates, both of these components will be affected, which could potentially lead to a recession.” However, he concluded, “While the global economy remains in trouble with high debt ratios, the general state of commercial real estate in the US remains strong due to high multifamily starts and renters occupying quickly.”
A comparable take on the US economy, and US commercial real estate, came from Scott Muldavin, 2017 chair of the Counselors of Real Estate, and Peter Burley, chair of the group's external affairs committee. Geopolitical and economic uncertainty, volatility in the energy markets and weaker trade volume all could slow domestic growth and lead to fewer job gains in the year ahead, they told NAR conference attendees. “The good news is that even with U.S. economic expansion at around 2%, the US is still outperforming other major countries around the world,” said Muldavin.
Burley pointed out that demographic shifts are poised to transform the real estate industry now that Millennials have surpassed Baby Boomers as the largest generation. With a growing share of Millennials now entering their mid-30s, an increasing number of them will be getting married and eventually having children.
However, Burley cited the lack of new supply coming onto the market, which has made buying a home more expensive. “Home prices have outstripped incomes and it makes it very challenging for Millennials looking to buy,” he said. “As a result, rental demand is expected to remain very strong.”
As it has for the past five years, the CRE recently issued a top 10 list of the issues and developments that will define the real estate industry in the upcoming year. This year's list is as follows: the changing global economy; debt capital market retrenchment; demographic shifts; densification/urbanization; the political environment; housing affordability and credit constraints; the disappearing middle class; energy; the sharing and virtual economy; and the rise of experiential retail.
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