The Urban Land Institute (ULI) is forecasting a 12 per cent reduction in U.S. commercial real estate sales to the year 2014 due to lower projections for economic growth. Figures released by the organization now predict sales of $748 billion in the period.
Sales of warehouses, office buildings, and shopping centers are expected to reach $223 billion this year, rising to $250 billion next year and increasing to $275 billion in 2014. These figures are taken from a survey of 39 analysts and economist with “real estate investment, advisory and research firms.” In a report released six months ago, the sales figures were much rosier, with sales forecasts set at $250 billion for this year, $290 billion for 2013, and $312 billion the following year.
The recovery in commercial real estate is being weighed down by the sluggish economy. The new forecast is based on the United States’ gross domestic product rate, which is projected to increase by only two per cent this year and in 2013. In 2014, it is expected to rise by 2.9 per cent. In the spring 2012 forecast, numbers were based on the basis of the GDP growing by three pre cent per annum.
The numbers were higher on this survey than the last one for performance of real estate investment trusts. The forecast for annual returns of equity REITs is set at 15 per cent this year and 10 per cent for 2013 and 2014. In the previous survey, the numbers came in at 10 per cent for 2012, 9 per cent for 2013 and 8.5 per cent for 2014.
Compared to the current bond market, real estate can provide some very attractive rates of return. The current survey results will likely bring more new investors into the fold.
