Commercial Real Estate Investment Expected to Stay Strong Through Fourth-Quarter 2016

Transwestern Report Includes Global Economic Outlook and Capital Markets Overview

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Transwestern

Oct 28, 2015, 07:00 ET

HOUSTON, Oct. 28, 2015 /PRNewswire/ -- Capital flows into commercial real estate are expected to remain strong through fourth-quarter 2016, though amounts could be impacted by high prices and valuations, rising rates and economic uncertainties, according to the October edition of "the BRIEFING," a report compiled by Transwestern that covers the national and global economy, capital markets and commercial real estate.

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NATIONAL ECONOMY

  • The economy grew 3.9 percent in second quarter and 0.6 percent in first quarter for an average of 2.3 percent, slightly higher than expectations at 2.1 percent
  • ISM manufacturing index dropped to 51.1 in August from 52.7 in July
  • Manufacturing exports declined 2.0 percent in second quarter
  • IMF slashed forecasted U.S. economic growth to 2.5 percent from 3.1 percent and called on the Federal Reserve to withhold any rate increases until the first half of 2016
  • Household wealth grew $695 billion to reach $100 trillion gross in assets with less than $15 trillion in debt
  • Second-quarter consumer spending was up 3.9 percent
  • September payroll increased by 142,000 new jobs – 61 straight months of job creation
  • Unemployment held at 5.1 percent, the lowest level since April 2008

GLOBAL ECONOMY

  • Global trade shrank 1.2 percent in May
  • European Union growth is expected to remain close to stall speed
  • China devalued the Yuan by 3.0 percent on August 12, demonstrating the exports are soft
  • Missteps by China have fueled speculation that it can't deliver the 7.0 percent growth target, with some expecting actual growth to be 3.5 percent

CAPITAL MARKETS

  • Uncertainty has produced considerable volatility and wariness among market participants
  • Tax aversion deals are alive and well with six year-to-date compared to nine last year as companies try to shift business to more tax-efficient countries
  • Bond markets signal "risk-off" with U.S. selling three-month Treasury bills at a yield of absolute zero for the first time
  • Pension funds are bracing for lower returns – more than two-thirds of state retirement systems have lowered long-term return assumptions from 8.0 percent to an average of 7.68 percent
  • U.S. companies continue to use substantially all of their operating earnings for share buybacks and dividends: first quarter at 104 percent and second quarter at 98 percent

COMMERCIAL REAL ESTATE

  • Investment into commercial real estate should remain strong, but appetites shifting to secondary and tertiary cities and suburban assets will naturally make it difficult to maintain the dollar volume seen in previous quarters
  • Real Capital Analytics data for the first eight months of 2015 reflect a 26 percent increase in sales volume
  • In Prequin's most recent survey, 78 percent of investors planned to commit the same amount of capital or more to real estate in the next 12 months
  • Moody's/RCA CPPI composite index pricing in major markets were at record highs for July and have nearly doubled since hitting the cycle low in 2013
  • As of August, core allocations have declined to 43 percent from 54 percent in December 2013
  • North American allocations increased from 37 percent to 73 percent over the same period

More information can be found in Transwestern's October issue of "the BRIEFING." Download the full report at http://twurls.com/briefing1015.

"The BRIEFING" is an aggregation by Tom McNearney, Transwestern's chief investment officer, of other articles and reports. McNearney leads Transwestern's capital market efforts for development and investment nationwide. McNearney also serves on the firm's investment committee and board of directors, and he directs the execution and expansion of the firm's principal investment activities.

ABOUT TRANSWESTERN
Transwestern is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service – the Transwestern Experience. Specializing in Agency Leasing, Management, Tenant Advisory, Capital Markets, Research and Sustainability services, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Transwestern has 34 U.S. offices and assists clients through more than 180 offices in 37 countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com and @Transwestern.

Media Contact:
Stefanie Lewis
713.272.1266
[email protected]

SOURCE Transwestern

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