12 Dec Commercial Real Estate Market Predictions for 2015
Commercial real estate values have been enjoying a steady rise since 2009 and it looks like this moderate rate of increase will continue in the coming year.
Nationally, non-residential construction is growing at good pace with total dollars spent increasing nearly 10%. Office vacancies are down as are industrial and retail vacancies. According to an article in Forbes magazine earlier this year, industry insiders say there is a sharp divide in retail between successful properties and those that are far less successful. The less successful ones are those that are dated and in the wrong locations.
Here are the National Association of Realtors’ (NAR’s) projections for the commercial market in 2015:
Apartment market: The rental market will likely remain a “landlord’s market” in 2015, with vacancy rates expected to stay below 5 percent in the new year. That will likely lead to demand pushing rents up even higher and keeping them above inflation. Apartment rents are projected to increase 4 percent in 2014 and 4.1 percent in 2015.
Office market: Vacancy rates will likely fall from 15.7 percent to 15.6 percent in 2015, with rents expected to rise 2.4 percent this year and another 3.3 percent next year.
Industrial market: Vacancies will likely rise from 8 percent to 8.4 percent next year, while annual rents will rise 2.4 percent this year and another 2.9 percent in 2015.
Retail market: Vacancy rates are projected to drop from 9.7 percent this year to 9.5 percent in 2015. Average retail rents likely will rise 2 percent this year and another 2.5 percent next year.
On the residential front, Freddie Mac economists have made the following projections in housing for the New Year:
Mortgage rates: Interest rates will likely be on the rise next year. In recent weeks, the 30-year fixed-rate mortgage has dipped below 4 percent. But by next year, Freddie projects mortgage rates to average 4.6 percent and inch up to 5 percent by the end of the year.
Home prices: By the time 2014 wraps up, home appreciation will likely have slowed to 4.5 percent this year from 9.3 percent last year. Appreciation is expected to drop further to an average 3 percent in 2015. “Continued house-price appreciation and rising mortgage rates will dampen affordability for home buyers,” according to Freddie economists. “Historically speaking, that’s moving from ‘very high’ levels of affordability to ‘high’ levels of affordability.”
Housing starts: Homebuilding is expected to ramp up in the New Year, projected to rise by 20 percent from this year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.
Single-family originations: Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancings are expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.
Multi-family mortgage originations: Mortgage originations for the multi-family sector have surged about 60 percent between 2011 and 2014. Increases are expected to continue in 2015, projected to rise about 14 percent.
So, on the whole, you can see that the future looks bright for the real estate sector with more steady growth in 2015.
Whether you’re interested in buying, selling or leasing in the Northeast Los Angeles area, give me a call and I can help guide you through the process and help you avoid the pitfalls and errors that are a natural part of real estate transactions.
“Let us help you make an informed real estate decision on your next transaction. Whether you’re buying, selling or thinking of leasing commercial space or just have a few questions that need immediate answering, give us call. We are here to help you make the right move”.
Mike Tolj (323) 258-4946