by Ann Withanee — January 5, 2011—Grubb & Ellis Company, a leading real estate services and investment firm, released its 2011 Real Estate Forecast, which foresees the start of a slow recovery in the leasing market for all property types in the coming year. It also predicts that activity in the investment market, which began its recovery earlier than anticipated in 2010, will expand beyond assets at the top and bottom of the quality scale to include properties with slightly more risk.
In 2010, both investors and lenders began to cautiously re-enter the market. Core, well-leased assets were in strong demand, while distressed, low-occupancy assets traded at modest prices. Properties between these two extremes were largely unsuccessful in attracting buyers and underwriters.
Lenders and investors are expected to broaden their search parameters in 2011, leading to more activity in the higher-risk middle of the scale. Prices for the best properties will stay strong, according to Grubb & Ellis, although the national price indexes may be restrained by a greater volume of riskier properties in the sales mix.
Because of continued unemployment, the office market is expected to experience a half-speed recovery in 2011. After peaking at 17.9 percent in the second quarter just 10 basis points shy of its all-time high in the past 24 years the vacancy rate ended 2010 at 17.8 percent. Grubb & Ellis researchers expect the vacancy rate in 2011 and 2012 to drop to 17 percent and 15.9 percent, respectively.
Asking rental rates bottomed out in 2010 but will experience only slight gains in the next two years, with tenants retaining the bargaining leverage.
For more information visit the Grubb & Ellis Web site.
