Monday, October 29, 2012

PwC and ULI Report Say Commercial Real Estate’s Road to Recovery Will Continue in 2013



Mitch Roschelle
ATLANTA, GA (Oct. 29, 2012) – Members of the commercial real estate community are optimistic about the industry’s prospects in 2013, forecasting increased profitability as well as more absorption and decreased vacancy rates across all property types.

That’s the overall theme of the recently released “Emerging Trends in Real Estate 2013.” The latest episode of Michael Bull’s “America’s Commercial Real Estate Show” provided an enlightening look at the highly anticipated annual report, which is produced by PricewaterhouseCoopers (PwC) and the Urban Land Institute. The report is based on surveys and interviews of 900 real estate executives, investors, developers and market experts.

“We’ve really taken a turn, and those who play in the commercial real estate space feel very good about 2013,” said Mitch Roschelle, a partner at PwC and the leader of the firm’s U.S. Real Estate Advisory Group.

Chuck DiRocco
For instance, 74 percent of those surveyed this year said profitability “would be good to excellent” in 2013, according to Roschelle. Last year, 63 percent said the same about 2012.

Nevertheless, 2013’s recovery will largely be a modest one, as the industry and the United States as a whole face several macro-level challenges. Noting that the report’s subtitle is “Recovery Rooted in Uncertainty,” Chuck DiRocco, a real estate researcher for PwC, said the challenges include the ongoing Euro crisis, the upcoming “fiscal cliff” facing the federal government and relatively small GDP growth.

Roschelle said a “chase for yield” is bringing more investors into the commercial real estate space, as those frustrated by theperformances of stocks and bonds seek the higher and more stable rates of return produced in the sector.

Office Property
As for specific property types, industrial “was without a doubt the breakout asset class projected for 2013,” Roschelle said. “Two-thirds of our survey participants felt that the asset class was a buy. Only 8.5 [percent] suggested it was a sell.”

Investor interest in the office market also is beginning to climb. “The office sector is really becoming top of mind, and the reason there is we haven’t overbuilt office,” Roschelle said.

However, while it should experience modest improvements, the retail market “is still going to struggle a bit in 2013,” DiRocco said. “We know retail spending has increased a bit, but we still think there’s just a little bit too much space out there.”

Industrial Property
The report also forecasts increased availability of both debt and equity financing and increased investor interest in larger secondary cities.

Among the “best bets” for 2013 listed by the report: investors will concentrate acquisitions in budding infill locations; developers will scale back construction of apartment properties in low-barrier-to-entry markets; and property owners will look to repurpose obsolete facilities.

The entire “Emerging Trends in Real Estate 2013” episode is available for download at www.CREshow.com.

The next “America’s Commercial Real Estate Show” will be available on Nov. 1 and will examine the issues facing the commercial real estate industry in 2013.

Contact:

Stephen Ursery
Wilbert News Strategies
404.965.5026




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