CBRE: Global Recovery Continues, U.S. in Driver’s Seat
- Oct 31, 2014
By Keith Loria, Contributing Editor
A new forecast by CBRE predicts positive signs for the commercial real estate industry in 2015, with Philadelphia being one of the top cities expected to see increases.
The market report was delivered at one of 10 planned events as part of CBRE’s 2015 national forecast series, “Moving Up the Risk Curve,” which includes forecasts for 10 U.S. cities.
“The growing economy bodes well for CRE demand in 2015. Office using job creation is rising, GDP is on the upswing,” Rija Beares, CBRE’s senior associate, tenant representation, told Commercial Property Executive. “Office occupiers are using real estate differently based on the shifting demographic and technology revolution. There is heightened demand nationally for urban and transit-oriented outpost locations for office occupiers driven by the influx of millennia into the workforce who prefer the conveniences of urban environments.”
CBRE also notes that vacancy rates will trend down in 2015 due to steady demand for space and relatively low levels of development across major U.S. markets
“Job growth is driving demand for space, which reduces vacancy rates,” Beares said. “Additionally, conversions to hotel and multi-family will take obsolete office out of the basis.”
According to Beares, healthcare, energy, tech and education are the industries driving demand throughout the nation. Both sectors are expected to continue to be primary economic drivers for the foreseeable future and job growth will continue for at least four more years.
Other noteworthy items at the forecast invent included the belief that unprecedented equity capital flows will lead to a supply/demand imbalance, which will maintain down- ward pressure on cap rates even in the event of a rising interest-rate environment; interest rates are expected to rise slowly over the next three years; and pent up rent increases will be a much greater factor in value over the next three years than they were in the last three.
The report also focused on commercial real estate in Philadelphia, calling it the center of healthcare innovation and home to excellent institutes of higher education, such as the University of Pennsylvania and Drexel University.
“Philadelphia has a burgeoning tech community and all of the fundamentals to drive growth within this sector,” Beares said. “Expect to see this to continue through 2015 and beyond as GDP rises and confidence in the economy continues.”
The report forecasts optimism about the state of commercial real estate in Philadelphia headed into 2015, thanks to increases in job growth, GDP and consumer confidence.
CBRE will also be hosting forecast events in Pittsburgh, Florida, San Francisco, Atlanta, Washington, D.C., Houston, Denver, Dallas and Sacramento.