Commercial real estate market has improved say economists

by Steve Randall04 Nov 2018

Two leading real estate economists believe there is a lot for professionals in the commercial sector to be confident about.

With the growing economy, growth in CRE should remain steady in the coming year according to Lawrence Yun, chief economist of the National Association of Realtors, and Dr. Sean Snaith, Director of the University of Central Florida's Institute for Economic Competitiveness.

The duo spoke at a forum during the 2018 Realtors Conference & Expo in Boston which runs through Tuesday, agreeing that the sector has improved, and that economic growth will continue to support increased leasing and property management activity.

"The economy is strong and we are seeing solid job gains, with no triggers to cause an economic recession. The mix of rising interest rates has led to some uncertainty but the continued economic growth has the commercial market on solid ground," said Yun.

Prices will be pressured by interest rates
Despite the optimistic outlook, both economists noted that rising interest rates will dampen the demand shown by investors during the years of low rates and weaken their willingness to pay high prices.

Commercial real estate prices are forecasted to decrease in response to the 93% price gains the market has experienced over the last 8 years.

And Dr Snaith said that government policy will play a large role in maintaining the strength of the market.

"The economic recovery has been historic in the last 10 years. We are currently experiencing a boost in government spending, which directly grows gross domestic product. Policies like tax reform have led to profits, in turn feeding investment spending. Looking ahead, regulatory relief is the special sauce needed for the commercial real estate market to thrive even further," said Snaith.

 


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