CRE Forecast: U.S. Growth Surges Ahead

A new U.S. real estate forecast based on a survey of 39 of the industry’s leading economists and analysts shows that commercial property transactions are expected to rise over the next two years to levels not seen since before the recession—exceeding the volumes hit in 2006. The annual study, conducted by the Urban Land Institute and financial and accounting services firm Ernst & Young, predicts that commercial property transaction volume will reach $430 billion by 2016.

The multi-year outlook also projects steady growth for the U.S. economy, sustained strength from real estate capital markets, and continued improvement in both commercial real estate fundamentals and the housing sector. The report is more optimistic than last fall’s industry outlook.

Economists surveyed in February and March predicted “consistent growth in the real estate industry, bringing some key factors back to pre-recession levels and others moderating to long-term averages,” Anita Kramer, vice president, ULI Center for Capital Markets and Real Estate, said in the report. “Fundamentals beyond multifamily continue to improve, with the retail sector now joining in. This overall outlook for real estate is supported by expected ongoing improvements in the economy.”

Total annual returns for commercial properties are forecast to average 9.4 percent this year—with retail and industrial buildings doing slightly better than the average.

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