Grubb & Ellis Forecasts Fewer Real Estate Deals in 2008

By Keat Foong, Executive EditorSanta Ana. Calif.— Grubb & Ellis Co. predicts that transaction volume for commercial real estate will decline by as much as 25 basis points this year. The company says in a statement that “buyers should return to the investment market in greater numbers this year as all-cash and low-leverage buyers including institutions, REITs and foreign investors step up with purchases.” All the same, transaction volume is expected to fall short of the 2007 record, the company predicts.“Even in the absence of a recession, the U.S. economy is likely to expand at a sluggish pace,” says Robert Bach, senior vice president, chief economist of Grubb & Ellis. Bach forecasts monthly payroll job growth to average 75,000 in 2008, which is “quite modest but enough to keep a floor under demand for commercial real estate. “The new year will bring a new set of acquisition and disposition goals for investors, motivating buyers and sellers to close the expectations gaps and meet somewhere in the middle,” says Bach. Grubb & Ellis’ 2008 Global Real Estate Forecast predicts that capitalization rates are likely to increase by up to 100 basis points. Cap rates for Class A properties in supply-constrained coastal markets will increase less than Class B and C properties in secondary and tertiary markets.Specifically, Grubb & Ellis forecasts that the multi-housing market will remain sound this year. According to its report, the housing downturn should continue to be a boon for the multi-housing rental market, although the shadow inventory of rentals will increase in some markets that have been overbuilt with condos or that experience a high level of foreclosures.