by Shane Henson — April 16, 2012—According to a new survey from the Urban Land Institute (ULI), America will see improvements in its real estate capital markets, real estate fundamentals, the housing industry, and economy in general during the next three years. For the survey, ULI, a nonprofit research and education organization that serves as a multidisciplinary real estate forum, questioned 38 leading real estate economists and analysts from across the United States.
Projections from the survey include:
- Commercial property transaction volume is expected to increase by nearly 50%.
- Issuance of commercial mortgage-backed securities is expected to more than double.
- Institutional real estate assets and real estate investment trusts are expected to provide returns ranging from 8.5% to 11% annually.
- Vacancy rates are expected to drop in a range of between 1.2 and 3.7 percentage points for office, retail, and industrial properties and to remain stable at low levels for apartments; while hotel occupancy rates will likely rise.
- Rents are expected to increase for all property types, with 2012 increases ranging from 0.8% for retail up to 5% for apartments.
- Housing starts will nearly double by 2014, and home prices will begin to rise in 2013, with prices increasing by 3.5% in 2014.
- Issuance of commercial mortgage-backed securities is expected to more than double.
These strong projections are based on a promising outlook for the overall economy, says ULI. The survey results show the real gross domestic product (GDP) is expected to rise steadily from 2.5% this year to 3% in 2013 to 3.2% by 2014; the nation’s unemployment rate is expected to fall to 8% in 2012, 7.5% in 2013, and 6.9% by 2014; and the number of jobs created is expected to rise from an expected 2 million in 2012 to 2.5 million in 2013 to 2.75 million in 2014.
The improving economy, however, will likely lead to higher inflation and interest rates, which will raise the cost of borrowing for consumers and investors. For 2012, 2013 and 2014, inflation as measured by the Consumer Price Index is expected to be 2.4%, 2.8% and 3.0%, respectively; and ten-year treasury rates will rise along with inflation, with a rate of 2.4% projected for 2012, 3.1% for 2013, and 3.8% for 2014.
The survey, conducted during late February and early March 2012, is a consensus view that marks the start of a semi-annual survey of economists, the ULI Real Estate Consensus Forecast, to be conducted by the ULI Center for Capital Markets and Real Estate. It reflects the median forecast for 26 economic indicators, including property transaction volumes and issuance of commercial mortgage-backed securities; property investment returns, vacancy rates and rents for several property sectors; and housing starts and home prices. Comparisons are made on a year-by-year basis from 2009, when the nation was in the throes of recession, through 2014, notes ULI.
To download a copy of the ULI Real Estate Consensus Forecast Webinar slides or to listen to the archived Webinar, visit the ULI Web site.
