Commercial real estate moving towards recovery!
NEW YORK – March 22, 2011 – There are signs of a strengthening U.S. economy in declining initial jobless claims, rising business and consumer confidence, and growing employment figures. As a result, the PwC Real Estate Barometer, a new feature in the first quarter 2011 PwC Real Estate Investor Survey, finds that the fundamentals of the commercial real estate industry are slowly improving; and it supports the consensus among surveyed investors that the industry is moving past the bottom of the cycle.
The barometer tracks the anticipated performances of the four main property sectors – office, retail, industrial, and multifamily – from 2011 to 2014. By analyzing historical and forecast stock data, the barometer measures how the inventory of each sector changes over time in relation to the four stages of the real estate cycle – contraction, expansion, recession and recovery. In addition, barometer analyses are prepared for various geographic regions and specific metro areas.
“Surveyed investors sense that the commercial real estate industry is moving past the bottom of the cycle, but the speed at which the U.S. economy is improving fundamentals has been slow and uneven at best,” says Mitch Roschelle, partner, U.S. real estate advisory practice leader, PwC. “However, as investors become more confident about the long-awaited recovery of the industry, they are eager to get deals done. This bodes well for the industry as the volume of capital chasing deals is expected to increase in all sectors as investors work to deploy capital before interest rates rise, overall cap rates increase and the industry shifts more in favor of sellers.”
According to the barometer, the majority of office stock will be in recovery by year-end 2011 due to a lack of new supply and signs of decreasing vacancy for the U.S. office market. Even though job creation remains a concern, recovery is on the horizon with 86.2 percent of the U.S. office sector out of the market bottom by year-end 2012. In contrast, individual office markets that are expected to remain in recession through 2012 include Chicago, Las Vegas, Los Angeles and Tampa.
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