United States Real Estate Report

Published 08 January 2015

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United States Real Estate Report

As the US economy continues its strong recovery, the commercial real estate market is profiting from an improving business environment, inflation rates and consumer confidence. Following robust growth in 2014, we expect 2015 to continue in similar lines, with new properties entering the market stabilising costs and vacancy rates in all sub-sectors and cities.

With a focus on the cities of New York, Los Angeles, Chicago, Dallas and Philadelphia, this report covers the rental market performance in terms of rates and yields and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the economy on a market that can dictate regional performance. In this respect, we generally expect the stable growth seen in 2014 to continue in 2015 with moderate-to-strong growth in all sectors. Reasons for this positive outlook are solid growth indicators of the wider US economy, rising employment rates, as well as growing consumer confidence and spending levels; the estimated 2.3% GDP growth for 2014 is forecasted to accelerate to 2.7% in 2015.

The industrial and office sub-sectors have been the main beneficiaries of the robust economic recovery of the past year. Vacancy rates have been plummeting in both segments as 2014 progressed and new projects have been added to the pipeline. However, also the retail sector has begun feeling the impact of the economic upturn. Rising consumer confidence, improving employment levels and decreasing inflation levels due to lower oil prices in the last months of 2014 have given rise to a positive outlook for 2015 as retail sales continue to increase. For 2015, we believe we will see similar demand trends as is in the past year. Paired with various projects entering the market, this stable growth in demand will however not lead to major changes in rental rates and yields as supply and demand is increasingly balanced. Of our monitored cities, we forecast growth to take...

Table of Contents

BMI Industry View
7
SWOT
9
Political
11
Economic
12
Business Environment
13
Industry Forecast
14
Office
15
Table: Forecast Rents, 2014-2015 (USD/sq m/month)
15
Table: Forecast Net Yield, 2014-2015 (%)
16
Retail
17
Table: Forecast Rents, 2014-2015 (USD/sq m/month)
17
Table: Forecast Net Yield, 2014-2015 (%)
18
Industrial
18
Table: Forecast Rents, 2014-2015 (USD/sq m/month)
18
Table: Forecast Net Yields, 2014-2015 (%)
19
Construction And Infrastructure Forecast Scenario
20
Table: Construction & Infrastructure Industry Data (United States 2012-2017)
20
Table: Construction & Infrastructure Industry Data (United States 2018-2023)
21
Macroeconomic Forecasts
27
Economic Analysis
27
Table: GDP By Expenditure (United States 2011-2018)
32
Industry Risk/Reward Ratings
34
Developed States Risk/Reward Ratings
34
Table: Developed States Real Estate Risk/Reward Ratings
34
United States Risk/Reward Ratings
34
Market Overview
36
Office
40
Table: Terms of Rental Contract/Leases, H213
40
Table: Net Yield, 2012-2014 (%)
41
Table: Historic Rents, 2012-2014 (USD/sq m/month)
41
Retail
41
Table: Historic Rents -- 2012-2014 (USD/sq m/month)
43
Table: Net Yield, 2012-2014 (%)
43
Table: Terms Of Rental Contract/Leases, H213
44
Industrial
44
Table: Net Yields, 2012-2014 (%)
45
Table: Historic Rents, 2012-2014 (USD/sq m/month)
46
Table: Terms of Rental Contract/Leases, H213
47
Competitive Landscape
48
Real Estate Investment Trusts (REITs)
48
Company Profile
50
Bechtel
50
Fluor Corporation
53
KBR
55
Turner Construction Company
57
Demographic Forecast
59
Table: The United States' Population By Age Group, 1990-2020 ('000)
60
Table: The United States' Population By Age Group, 1990-2020 (% of total)
61
Table: The United States' Key Population Ratios, 1990-2020
62
Table: The United States' Rural And Urban Population, 1990-2020
62
Methodology
63
Industry Forecast Methodology
63
Sources
64
Risk/Reward Ratings Methodology
65
Table: Real Estate Risk/Reward Ratings Indicators
66
Table: Weighting Of Indicators
67

The United States Real Estate Report features BMI Research's market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.

BMI's United States Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in United States.

Key Benefits

  • Benchmark BMI's independent real estate industry forecasts for United States to test other views - a key input for successful budgeting and strategic business planning in the American real estate market.
  • Target business opportunities and risks in United States through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our company profiles (inc. SWOTs, KPIs and latest activity).

Coverage

BMI Industry View

Summary of BMI’s key industry forecasts, views and trend analysis covering real estate and construction, regulatory changes, major investments and projects and significant national and multinational company developments.

Industry SWOT Analysis

Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the real estate sector and within the broader political, financial, economic and business environment.

Industry Forecasts Outlook

Historic data series (2010-2013) and forecasts to end-2019 for the domestic real estate industry and for the local and global finance industry.

Indicators Include:

  • Real Estate: Office, retail and industrial real estate yields for all major cities (%); short term forecasts on minimum and maximum real estate rental prices by sub-sector (USD per square metre and local currency per square metre).
  • Construction: Industry value (USDbn); contribution to GDP (%); employment (‘000); real growth (%).
  • economy: Economic growth (%); nominal GDP (USDbn); unemployment (%); interest rates (%); exchange rate (against USD).

BMI’s Real Estate Risk Reward Index

BMI’s Risk Reward Indices provide investors (real estate vendors, construction companies and financial investors) looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide an indices of highest to lowest appeal to investors, with each position explained.

Market Overview

Overview of the real estate sector, including analysis of existing/planned real estate developments and emerging industry trends in the office, industrial and commercial sectors

Market Analysis

Features detailed city-level data and analysis on rental prices, yields, contract terms and real estate availability with separate chapters covering the office, retail and industrial sub-sectors.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.

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Testimonials

'An essential, multi-faceted research tool. BMI’s thorough understanding of the major market players enables an informed – and informative – review of the sector’s actual performance, together with useful insights into current industry issues, which are topped-off with detailed and invaluable forecasts of industry and macroeconomic trends.’

Senior Research Analyst, ABC International Bank plc