December 17, 2018
The U.S. commercial real estate market will continue to perform well in 2019, according to a survey of Transwestern brokerage professionals in November. That bright forecast comes despite some volatility in the market. The expected strength is attributed to robust job growth and healthy underlying real estate fundamentals.
Transwestern’s Elizabeth Norton, who conducted the study, says, “Based on the recent elections, the likelihood of dramatic political or economic policy changes is low, and this paves the way for continued, albeit slower economic growth through a good part of next year.”
Key takeaways and 2019 sector expectations include:
- Transwestern’s U.S. office index, based on survey results, averaged 111.2 for 2019 market conditions, down only slightly from 112.9 for the 2018 outlook.
- Brisk economic activity and rising interest rates are expected to propel leasing velocity, tenant walk-throughs, and asking rents higher throughout most of the U.S.
- Amenities continue to drive tenant interest, with access to transportation or parking of greatest importance, followed by reliable Wi-Fi and walkability to dining, retail and other services.
- Three-quarters of respondents expect development levels to be flat or slightly higher, with select markets showing concern of oversupply and rising construction costs.
- Regions anticipated to have the strongest conditions include the Southeast, Southwest and Mid-Atlantic.
- The U.S. index averaged 117.2 for medical office market conditions, which is considered relatively flat conditions.
- Leasing activity, tenant walk-throughs, asking rents and development in the medical office sector all are expected to increase, as a growing and aging population, combined with technological advances, drives demand.
- More than 90 percent of respondents expect asking rents to be slightly higher, driven by leasing activity and overall tightening of medical office space.
- Four-fifths of respondents predict cap rates will be flat compared to 2018, with most expecting investor interest to rise over the year.
- Healthcare reform and its impact to the market was cited as a challenge.
- The U.S. index averaged 122.1 for 2019 market conditions, down slightly from 130.9 for the 2018 outlook.
- Tenant walk-throughs, asking rents, and development are all expected to be higher next year.
- 72% of respondents expect more investment interest, with half expecting cap rates to remain flat.
- Of concern for respondents are rising construction prices and lack of available product.
- Regions anticipated to have the strongest market conditions include the Northeast and Mid-Atlantic.
*Pictured 3400 at CityLine in Richardson, TX
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