CRE could reach '10-year high' by 2016.


Commercial property transaction volume will reach $430 billion by 2016--exceeding 2006 volume--a panel of 39 real estate economists and analysts predicts.

The semi-annual Urban Land Institute (ULI)/Emst & Young Real Estate Consensus Forecast projects steady economic growth, sustained strength from capital markets and continued improvement in commercial real estate fundamentals.

"Respondents to the Consensus Forecast survey project consistent growth in the real estate industry, bringing some key factors back to pre-recession levels and others moderating to long-term averages," said Anita Kramer, vice president with ULI's Center for Capital Markets and Real Estate.

The forecast, which covers 2014 through 2016, suggests more optimism than a similar survey in October. Respondents expect hotel occupancy rates to continue to improve and vacancy rates to decrease modestly for office, retail and industrial properties. In addition, the forecast expects a turnaround in retail rental rates, turning them positive for the first time since 2007.

"This overall outlook for real estate is supported by expected ongoing improvements in the economy," Kramer said.

The forecast expects the overall economy will continue expanding at a rate equal to the long-term 2.6 percent average. Survey respondents predict that employment will grow by more than 7.5 million jobs in the next three years, pushing the unemployment rate down to 6.3 percent by the end of this year and 5.8 percent by the end of 2016.

Analysts agree that 10-year Treasury rates will continue moving up, reaching 3.4 percent by year-end 2014,4.0 percent by the end of 2015 and 4.4 percent by December 2016. Though rising Treasury rates will increase borrowing costs for real...

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