by Brianna Crandall — November 30, 2012—The U.S. presidential election may be over, but economic uncertainty will continue to hinder corporate decision making and impede improvement in commercial real estate fundamentals well into 2013, according to the 2013 National Commercial Real Estate Outlook produced by Jones Lang LaSalle, a financial and professional services firm specializing in real estate with more than 1,000 locations worldwide.
A recession is unlikely in 2013, Jones Lang LaSalle’s researchers concluded, but businesses, lenders and investors are still waiting to see how legislators will deal with the “fiscal cliff,” which consists of tax cuts set to expire at the end of the year and federal spending decreases scheduled to begin in January. Most aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act, too, will be implemented starting in 2013.
The group expressed “reasonable confidence” that some or all of the fiscal cliff will be averted, although the Euro crisis may get worse before it gets better, and expressed hopes that once some of the hurdles are cleared, the release of some pent-up demand could accelerate growth in the second half of 2013.
The forecasters called for moderate performance improvement in the multifamily, hotel, and industrial sectors nationwide, while balanced new construction and absorption will negate any net change in retail fundamentals. Growing bifurcation in the office market will reportedly increase rent growth and net absorption in urban markets driven by technology, healthcare and energy jobs, while occupancy and rent stagnate in most of the nation’s suburbs and in markets with little exposure to those growth industries.
2013 Commercial Real Estate Outlook highlights:
- In the office sector, a flight to efficiency is increasing demand for large floor plates and newer properties that help to attract young talent and reduce tenants’ operating costs through occupancy rightsizing.
- E-commerce and m-commerce, or purchases over mobile devices, is increasing demand for large distribution centers (500,000 sq. ft. or more), with 36 ft. clear heights and extra parking for labor-intensive picking of products and next-day delivery.
- “Experience shopping,” and retail centers offering restaurants and entertainment to attract customers, will fare best in an otherwise challenged retail landscape.
- Multifamily performance should remain healthy as renter population growth diminishes the threat of new deliveries. Investors will become less risk-averse as they seek higher returns in secondary markets.
- Hotel revenues per room are expected to increase 4-6% in 2013, fueling heady pace of investment activity reached in second half of 2012. Lending for hotels should increase as well.
- Total investment transaction volume will increase by 10-15% in 2013, continuing 2012’s slowed pace of trading following a 64% spike in 2011.
Visit the Jones Lang LaSalle Web site for a replay of the firm’s 2013 Forecast presentation.
