Last month, the Urban Land Institute and thousands of CRE professionals convened in Denver for the ULIs Fall Meeting. There, the ULI and its research partner, PriceWaterhouseCoopers, revealed their 2013 Emerging Trends report. Here are my Top 10 Trends for Commercial Real Estate in 2013, based on ULI/PwCs forecast:
> Slightly improved employment numbers suggest a decrease in vacancies among office, industrial, and retail properties
> Multifamilys high demand is expected to continue, though multifamily development will be less profitable–in the next few years among low-barrier-to-entry markets
> As yields remain low in other investment sectors, investors demand for real estate is expected to remain strong or even increase
> Expect more opportunistic real estate ventures in 2013, the report says, with greater opportunity in secondary markets
> Office landlords will continue to seek out strong, stable tenants in growth industries
> 2013 transaction volume should exceed those of previous years but performance is contingent on the strength of the capital markets (and vice versa)
> Likewise, the report suggests an increase in CMBS activity
> Owners and developers are expected to benefit from quality, core projects with LEED certification and energy efficient features
> Industrial near the major distribution hubs will continue to flourish
> 2013 is also expected to present many opportunities for value-add projects and the repurposing of commercial buildings
Obviously, these are in no particular order. If youd like to see the ULIs full report, you can see the PDF.
As I always like to say, especially when reporting someone elses information, take this with a grain of salt. None of this is a guarantee. As many of us learned the hard way, investment advice isnt always correct, no matter how logical it is at the time. This report, reflecting the experience and expectations of real estate professionals, is essentially a logical extension of the conditions weve seen since the financial downturn: weakened capital markets high single-family vacancy and financing difficulties, which have boosted multifamily demand weak employment keeping vacancies high in retail and some industrial bearish investment and a retreat to core assets etc., all of which is the baseline from which our economy and real estate market are (slowly) improving. Will these predictions come true? Barring any crisis on the scale of the Great Recession, I would say yes. Still, nationwide reports only offer so much useful information. Unless youre a REIT or a major fund manager crafting your 5- or 10-year strategy, odds are youre probably thinking on a more local level. In that case, it may be best to go with one’s own experience and the wisdom of colleagues involved in the same market. U.S. real estate is extremely diverse; conditions vary by neighborhood.
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