The U.S. commercial real estate recovery, although slow, I has visibly improved in fundamentals, capital availability, asset pricing and transactions, according to Deloitte LLP, New York.
"Overall, we are seeing recovery in commercial real estate activity; however, the pace of recovery is likely to be more modest across several property types until the broader economy picks up," said Bob O'Brien, vice chairman and Deloitte's real estate sector leader.
The firm's 2013 Commercial Real Estate Outlook reported that the apartment and lodging sectors continue to grow strongly but finds that the comparatively slower recovery in the office, industrial and retail sectors "indicates a coming era of reduced expectations and slower growth."
Deloitte examined both macroeconomic and commercial real estate fundamentals, and reported that the European financial crisis together with the U.S. economy's structural issues have resulted in slower hiring, weaker consumer sentiments and reduced manufacturing.
"While key commercial real estate parameters--fundamentals, transactions, lending--have been on the mend, we will likely see a more modest pace of growth, given the continued slow macroeconomic growth," the report said.
Leasing activity has improved across most property types, with flat to positive net absorptions, Deloitte's real estate group said. But revenue growth for commercial real estate players may not reach pre-recession levels over the next few years, especially as construction and delivery of new properties remains minimal.
While banks eased underwriting standards and increased commercial mortgage originations in the first half of the year, the high level of maturing debt remains a significant barrier to recovery in the commercial real estate market, Deloitte said. High commercial mortgage-backed securities (CMBS)...