The commercial property market in Pennsylvania and around the country is likely to remain active in the next few years according to a group of 51 economists and industry experts. The Urban Land Institute releases a Real Estate Consensus Forecast every two years, and the organization’s September 2016 report predicts that office, retail, industrial and apartment vacancy rates, some of which are at near historic lows, could fall even further.
However, the ULI report does predict some slowing. Transaction volume is expected to fall by about 21 percent to $428 billion in 2018 from the post-recession high of $545 billion recorded in 2015. This reduction in volume is expected to reduce the amount of commercial mortgage-backed securities issued in 2016 to about $60 billion. CMBS issuance reached $101 billion in 2015, and it is expected to begin growing again in 2017.
Decreasing transaction volume is also expected to impact prices. The value of commercial real estate has surged by 5.7 percent as the nation’s economy emerged from years of recession, but this rate of increase is predicted to fall to 2.5 percent by 2018. This could lead to an increase in the value of equity real estate investment trusts that are valued based on the rents they collect rather than potential appreciation. Rents in most major U.S. cities are expected to remain high for the foreseeable future as businesses continue to grow and the demand for commercial space heats up.
While experts may be generally optimistic about the state of the commercial property market, there are still many pitfalls that real estate developers should be wary of. Commercial property disputes can be difficult and costly to resolve, and regulatory problems like permit or zoning issues may cause ruinously expensive delays. Experienced real estate attorneys could help their clients to avoid these challenges by performing thorough due diligence and suggesting prompt action when potential problems are discovered.