The Mayans might have had a bleak vision of 2012, but the financial forecast of 2013 – as far as the commercial real estate market goes – is a future worth exploring, and possibly living in. It’s been a hard road for many Americans since the recession began eating away at the economy as far back as 2007, resulting in a calamitous decline in property values, and a rise in foreclosures. But while other sectors are slowing, the Wall Street Journal reported that the U.S. Housing market remains a key economic driver.
According to the National Association of Realtors’ (NAR) chief economist, Lawrence Yun, the market has been slowly building momentum, and the economy is expected to grow by 2.5 percent next year. The NAR’s quarterly real estate forecast finds that vacancy rates over the next four quarters are forecast to decline 1.0 percentage point in the office market, 0.6 point in industrial, 0.2 point for retail and 0.1 point in multifamily.
In a recent article, the New York Times reported home values in the first six months of the year were up by 5.9 percent (the best it’s been in seven years), and a report by The Conference Board, a private group, have pointed at an increase in consumer confidence since September. Throw in the Labor Department’s report earlier this month citing the addition of 146,000 jobs in November (which brought the unemployment rate down to 7.7 percent), and a more optimistic view is clearly on the horizon.
Forbes contributor Bill Conerly, has a less enthusiastic view of 2013, and sees only marginal improvement ahead as it relates to commercial real estate, with a real boost occurring either in 2014, or 2015. But perhaps, the real lesson here has more to do with the country’s mood than with hard numbers and statistical projections. True enough, improvement in commercial real estate will likely hinge on improvement of the national economy, but good news can be its own catalyst.
Just take a look at your own neighborhood. Some homeowners are already seeing an increase in their home’s value, however small. And more people are renting with an option to lease, as a way of getting around the stricter criterion for traditional mortgages.
While no calendar exists to give us a glimpse of 2013 before it actually happens, the evidence, so far, seems to suggest a more robust economy than we’ve seen in years, which should have a positive impact on commercial real estate.
So what comes next? If you ask me, there is plenty of opportunity out there.