Online debt and equity investing – also known as crowdfunding – is coming to the world of commercial real estate. Find out how innovations in 3D printing are enabling developers to build the future. Also access Commercial Market Survey results, a timeline on Lease Accounting, and a roundup of tech solutions including RPR Commercial and the REach® Class of 2014.
Q3 2014 Overview
- The St. Louis Industrial market is still going strong as the market absorbed over 1,000,000 SF during the quarter.
- As class A space becomes increasingly scarce, Landlords are less likely to be offering the free rent concessions that were being thrown in the deals even as recent as nine months ago.
- Quoted lease rates are also ticking up as much as 10%-15%. This is a necessary trend if lease rates are to keep up with the construction cost and still make the exit spreads.
- Holding firm to asking rates for non-credit tenants will be the trend until some of the planned speculative development comes out of hte ground and forces competition.
- Vacancy rates are expected to continue to decline through the end of the year.
Q3 2014 Overview
- With overall office vacancy rates at 15.4%, product is available to support continued growth for the foreseeable future.
- Large blocks of space are anticipated to be taken down throughout the 4th quarter and into the new year.
- The supply of sublease space continues to remain a non factor, accounting for less than 1% of the total market.
- Class B space continues to struggle to attract new tenants as there is a general move up to higher Class A product that offers better parking and more amenities for the office user.
The Commercial Real Estate Lending Survey is conducted annually and provides an overview of lending conditions that impact commercial transactions nationally, based on responses from commercial real estate members.
According to the first Urban Land Institute/EY Real Estate Consensus Forecast of 2014, commercial real estate fundamentals are projected to continue improving. Vacancy rates are expected to decline for office, industrial and retail properties, while availability for apartments is estimated to rise. Commercial rents are poised to rise for the four core property types in 2014 in the 1.9 percent to 3.8 percent. In 2016, rent growth is projected to range from 2.2 percent to 3.6 percent.
On the investment front, sales volume is forecast to exceed the 2006 volume by 2016, totaling $430 billion. The ULY/EY forecast estimates that Institutional assets will offer total returns of 9.4 percent in 2014, and moderate to around 8.5 percent by 2016.
As a significant portion of the data underpinning ULY/EY’s forecast is aggregated at the top end of transactions—above $2.5 million—it points to a brighter commercial environment, especially for top-tier markets. With 90 percent of commercial REALTORS® managing transactions valued at or below $5 million, and mainly located in secondary and tertiary markets, the 2014 Commercial Real Estate Lending Survey shines the spotlight on a significant segment of the economy which tends to be somewhat obscured.
Five years after the Great Recession, lending conditions in REALTOR® markets show signs of sustainable recovery. With commercial real estate fundamentals and investment prices on a solid upward trend, lending conditions eased as financing sources broadened in 2014.
Highlights from this month’s report include:
- Store Closings Expected to Moderate, Closings to Rise Significantly
- Dollar Stores and Accessories Chains To Be Among Most Aggressive This Year
- Electronics & Office Supply Stores Remain Cautious On the Year Ahead
- Heightened Competition Spurs Remodeling Activity Among Children’s Apparel, Shoe Retailers