BMI View: A budding business environment, low inflationary policy and loose borrowing conditions contribute to a positive outlook on US commercial real estate. Recent financial troubles in China, resulting in a stock market sell-off, influenced uneasy consumer confidence and stagnant job creation over the last quarters of 2015, which look to cause slight headwinds to the sector. Although overall, good financial availability and growing demand should b uoyant rental rates in the long term.
The US economy currently sits in good health and by many measures looks in the best shape since the great recession, this is primarily supported by lower oil prices stable labour market and growing business sentiment. Although, recent devaluation in the Chinese stock market, resulting in a significant slowdown in growth for the Asian economy, and appreciation in the dollar will cause slight headwinds for the broader US nation, and subsequently influence the performance of commercial real estate. However, the good underlying fundamentals look to buffer the nation from external pressures, and we forecast real GDP to be subdued at 2.5% over 2015, while 2016 will see this rate rise marginally to 2.6% owing to further foreign interest into securing 'safe haven' investments in the wake of global economic troubles.
The recent appreciation in the greenback weighs heavy on export-orientated services. There are raised concerns among industry players regarding manufacturing production due to weaker exports, although this should result in good demand for warehouse space as companies look for larger storage facilities. The current limited supply and growing demand for contemporary industrial units, such as logistics parks, will keep the sub-sector growth robust and possibly see marginal rental cost rise by early 2016, despite a slight slowdown in economic growth that has been witnessed over 2015.
Looking towards the office industry, we opine that this sub-sector will prove to remain an appealing option for potential investors over the next few years. We can accredit this good outlook to the growing demand from domestic and international corporates to operate within premium grade office units, which at the moment is in fairly limited supply across the cities we cover. There are projects in the pipeline, with some expecting to reach the market over 2016, especially in prime locations within New York City and Los Angeles on the back of a healthy job market and lower unemployment. Conclusively, the current momentum in demand should result in upward rental trend.
Concerning retail establishments, consumers in the US are currently more cautious with spending on goods, as a result of the uncertain economic period brought on by headwinds from the Chinese economy slowdown. This has seen retail sales stagnate, with consumers focusing more on 'eating out' and substantial purchases including 'cars', which will see demand dwindle for high-street retail units and therefore subdue rental rates. We expect this to be a common theme within Chicago, Los Angeles and Philadelphia, while Dallas will see contracting rentals owing to take up of class B and C properties, instead of class A; New York City however will witness upward trend as a result for growing demand for premium grade premises in prime locations.
Regarding the commercial real estate industry as a whole, it is important to consider the vulnerabilities from within the economy, such as dwindling consumer confidence and a rising higher-yield bonds market indicative of struggling financial periods, as well as external pressures from potentially further contractions in the global economy. Although, the underlying strength in the US economy should absorb the majority of potential issues, that would look to impact the commercial real estate market over the coming years.
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.
- 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).
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.
- 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.
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
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.
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.