Magazine article Mortgage Banking

Grubb & Ellis: 'Sluggish Recovery' in 2012

Magazine article Mortgage Banking

Grubb & Ellis: 'Sluggish Recovery' in 2012

Article excerpt

Grubb & Ellis Co., Santa Ana, California, predicts "slow but continued growth" for all commercial real estate property sectors.

The firm's 2012 National Real Estate Forecast predicts the multifamily sector will perform best this year, followed by hospitality, industrial, retail and office.

"Although a variety of economic and political factors, including continued high unemployment, an upcoming U.S. presidential election and the unresolved European sovereign debt crisis weigh on the minds of real estate owners, users and investors, we anticipate gradual improvement in leasing markets and a boost in investment sales volume," said Robert Bach, senior vice president and chief economist at Grubb & Ellis.

Multifamily

The multifamily sector was among 2011's strongest performers and is "poised for repeat strong performance," said the report. Effective rental rates and occupancy rates increased, as the market grew by a mere 38,000 units. Tough qualifying standards for prospective homebuyers and the growth of the 18-to-34-year-old age group mean multifamily will be one of 2012's most sought-after commercial real estate investments, Grubb & Ellis said.

Top multifamily markets have higher house prices and other barriers to entry, coupled with stronger prospects for job and population growth. The San Jose-Silicon Valley, California, region ranked No. 1, followed by New York City, Boston, San Francisco and Orange County, California.

Office

The office market recovery accelerated last year, but not to the speed of prior expansions. This year's outlook is stronger, with an expected national vacancy of 15.7 percent by year-end. Net absorption is projected to reach 52 million square feet; new deliveries will be minimal at 9 million square feet.

Rental rates are predicted to reach $31.38 per square foot for class-A space, up $0.24 from 2011; and S22.86 per square foot for class-B space, up $0.04 from 2011. Grubb & Ellis does not expect the office market to reach equilibrium until 2013 or 2014.

The report predicts that technology and/or biotech hubs will offer the strongest long-term opportunities for office investors. The top five markets on the list--San Francisco; Seattle; Austin, Texas; San Jose and San Diego, California--all fit this profile. …

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