Steady job gains and stable leasing demand should expand commercial real estate activity during 2016, according to a collaborate report published by Deloitte, RERC and the National Association of Realtors®.  Industry analysts project moderate growth in commercial real estate activity nationwide, sustained by demand for all types of commercial space. This includes office, industrial, apartment, retail and hotel property.

The expectations are based on continued U.S. economic growth at a rate of 2% to 3% this year. In turn, this would create approximately two million net new jobs in 2016.

Some markets may be reaching a plateau with capital appreciation. While this isn’t the case for the Boston Metro, some cities are impacted by deflationary pressures, prompted by low energy prices. Houston, for example, may see tapering office sector demand if energy prices experience a prolonged slump. Localized deflation aside, national vacancy averages are expected to decline somewhat for all commercial property types. This will support improved income growth.

Another factor affecting commercial real estate projections is the aggressive rise of apartment rents. Employment growth has helped sponsor an increase in housing demand in many parts of the country, pushing up home prices and rental costs. Multi-family construction has been slow to catch up, though major developments in several cities will see completion in late 2016. Overall, apartment vacancies are expected to increase modestly by the end of the year. Despite this, rental prices are expected to trend higher, with investors enjoying strong income flows, even as capital appreciation may begin to level off.

National Association of Realtors® economist Lawrence Yun predicts that the residential investment component of the GDP could rise as much as 10% during 2016.

Of course, there are some headwinds. Global economic flutters and a nervous U.S. stock market could impact commercial real estate investment. All considered, analysts are suggesting that while capital appreciation growth rates may peak this year, strong occupancy rates will continue to support attractive income flows. Investors who take the long view will see the glass as half-full, especially when holding income-producing properties.

Boston Metro commercial real estate is highly localized and complex. When you are ready to begin, expand, or relocate your business, use the guidance  of an experienced commercial real estate broker who understands the market! Whether you are thinking of buying or leasing Boston Metro commercial real estate, we can help you find the ideal property. Please contact us today for expert guidance!

Jay Nuss
Jay Nuss Realty Group, LLC

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