“Dime con quién andas y te diré quién eres.” “Tell me who you associate with, and I’ll tell you who you are.” Bill Conerly Contributor
Non-residential real estate values should rise at a modest-to-moderate pace in the coming two years, with stronger operating earnings partially offset by rising interest rates.
Commercial Real Estate Review
Private non-residential construction is growing at a fairly strong pace, except in comparison to its past peak. Total dollars spent have increased by nearly ten percent in the past 12 months. Nationally, office vacancy is edging down, though 16 percent vacancy doesn’t seem to justify the 17 percent increase in office construction. However, remember that the gain in construction is from a very low base.
Industrial vacancy has dropped by almost a percentage point in the past year. Manufacturing construction has increased by nearly eight percent in the past year. Retail also enjoys slowly declining vacancy and more construction—but again from a low base. Industry insiders say that retail is sharply divided between successful properties and others, the others frequently being dated and in the wrong locations.
Hotels are enjoying higher occupancy (up over a percentage point in the past year) as well as average room rates that have increased by three percent, on about one percent more rooms available. This performance helps to explain the nearly 50 percent increase in hotel construction in the past year—but again from a very low base.
Commercial real estate owners have improved their ability to repay debt, with the bank charge-off rate down to just five basis points last quarter.
Rising commercial mortgage interest rates hurt investment property values in 2013, as shown by REIT prices. They have recovered somewhat thanks to strong operating earnings. Combining appraisals of institutional properties with operating earnings indicate that total returns in 2013 averaged 11 percent. That’s higher than the nine-percent long-run average.
Commercial Real Estate Forecast
The outlook for non-residential operating returns is very positive. The expanding economy will boost occupancy and provide opportunities to increase rents. There is relatively little new supply coming to market in most cities, so landlords will be in the catbird seat for a few more years.
The forecast for construction is also positive, though it will be years before it is really strong. Vacancy rates are still high enough, on average, to discourage widespread development.
Property values are a little tougher to anticipate. On the plus side, higher operating revenue should boost values. On the negative side, higher interest rates will be a downward force. Past experience (as I explained in Commercial Property Values With Rising Interest Rates) argues for rising values in this type of market, but don’t expect appreciation to be as strong as the rise in earnings.
I decided to become an economist at age 16, but I also started reading my grandmother’s used copies of Forbes. After getting a Ph.D. from Duke and working for three years as a professor, I found my calling in the business world. I began as a corporate economist (PG&E, Nerco, First Interstate Bank) before entering consulting, helping business leaders connect the dots between the economy and business decisions. I wrote Businomics: From the Headlines to Your Bottom Line—How to Profit in Any Economic Cycle to help corporate executives and small business owners understand how the economy impacts their companies. I’m the longest-tenured member of the Oregon Governor’s Council of Economic Advisors, chairman of the board of Cascade Policy Institute and senior fellow at the National Center for Policy Analysis. My friends and fans…
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Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial Investment Real Estate Broker in Arizona now for 20 years and I worked with banks and their commercial REO properties for 3 years. I am also a commercial landspecialist in Phoenix and a Landspecialist in Arizona.
WHETHER YOU LEASE OR OWN
NOW IS THE TIME FOR YOU TO EXPAND, UPGRADE OR INVEST.
we are at on the a rise of the cycle in Commercial Real Estate. so there is only one way and it’s called we are going up and now is the time for you to expand, upgrade or invest in Commercial Properties in Phoenix. The prices on deals I may get you will not be around forever.
WAITING TO SELL YOUR LAND ? TIMES CHANGE / IT’S TIME
We barely could give land away the last few years, but times are changing. Even in those meager years, I sold more land across the state than most other brokers. Before the real estate crash I was a land specialist in Arizona with millions of dollars of transactions, but then I had to change and also sell other commercial investment properties, which was fun, but I am a Commercial Landspecialist in Arizonal, a Commercial Land Specialist in Phoenix and love to sell land, one acre to thousands of acres.
If you have any questions about Commercial Investment Properties in Phoenix or Commercial Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion in Commercial Properties in Phoenix or Commercial Properties in Arizona with you.Obviously I am also in this to make money, but it could be a win-win situation for all of us.
Please reply by e-mail firstname.lastname@example.org or call me on my cell 520-975-5207 or Office:480-948-5554
PLEASE NOTE, I CHANGED BROKERAGES BUT CELL PHONE AND E-MAIL STAY THE SAME.
Walter Unger CCIM
Associate Broker, West USA Commercial Real Estate Advisers
7077 E. Marilyn Road, Bldg 4, Suite 130
Scottsdale, AZ 85254
Office : 480-948-5554
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