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Economy on an upswing

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  • | 11:00 a.m. April 25, 2014
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Commercial property transaction volume will reach $430 billion by 2016, according to an Urban Land Institute report, which would exceed the volume for 2006.

The ULI/E&Y Real Estate Consensus Forecast report, a multiyear outlook based on opinions from 39 of the industry's leading economists and analysts, actually projects steady growth in commercial real estate fundamentals and housing. The ULI Center for Capital Markets and Real Estate prepared the report in conjunction with consulting firm EY, formerly called Ernst & Young.

“Respondents to the Consensus Forecast survey project consistent growth in the real estate industry, bringing some key factors back to pre-recession levels and others moderating to long-term averages,” ULI Center for Capital Markets and Real Estate Vice President Anita Kramer says in a release. “Fundamentals beyond multifamily continue to improve with the retail sector now joining in. This overall outlook for real estate is supported by expected ongoing improvements in the economy.”

The forecast is even more optimistic than what the organizations published in October. For one, commercial mortgage-backed securities, a key source of financing for the commercial real estate industry, is expected to continue its rebound through 2016, the report states. Hotel occupancy rates are projected to improve, the report adds, while vacancy rates are projected to decrease modestly for office, retail, and industrial properties.

Another key projection: Forecasters predict a retail rental rate turnaround in 2014, with the first gains since 2007. Other findings from the report include:

Gross domestic product is expected to grow 2.8% in 2014 and 3% in both 2015 and 2016;

Employment will grow by more than 7.5 million jobs in the next three years. The unemployment rate is expected to drop to 6.3% by the end of the year, 6% by the end of 2015 and 5.8% by the end of 2016;
Inflation is expected to grow 1.9% in 2014 and increase 2.2% in 2015 and 2.5% in 2016.


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