OUR 2015 COMMERCIAL REAL ESTATE RECAP & 2016 OUTLOOK

February 27, 2016

Nationwide, 2015 commercial sales jumped 23 percent over 2014 to chart the second highest transaction volume ever at $533 billion, just 7.5 percent behind 2007, the all-time record peak.

Property values appreciated 12 percent in 12 months on average.  Overall, prices climbed and rates of return declined as Buyers roared back into the market.  Meanwhile, the market shifted from a Buyer’s Market to a Seller’s Market due to the tightening supply of available investment properties, especially single-tenant net leased “trophy properties.”

Average cap rates in the northern Intermountain region across all product types are hovering slightly over 7 percent today, about a half percent over the national average and considerably better than some major markets where rates have dipped below 4 percent.

We predict 2016 activity will slow but remain steady due to low interest rates, strong economic fundamentals for real property, and a balancing of supply and demand.  It’s clearly a good time to harvest equity by selling, diversify holdings, anticipate new demographic demands, and discover new and expanding opportunities in retail brands and urgent healthcare operations that are expanding rapidly.

Buyers will enjoy still low interest rates, strong rents, and emerging opportunities in growing markets.

Also:

  • Tertiary markets like Boise and Spokane are outperforming metros by two or more points

  • Spread between cap rates and interest rates remains healthy, unlike the squeeze prior to the downturn that signaled elevating risk

  • Deals and value-add properties are getting harder to find

  • Tepid global economy supports continuing strength for the domestic US real estate market

  • Interest rates will remain low as the Fed meters the economy for ongoing expansion

  • Election jitters will ripple through the economy, more than usual, due to curious collection of candidates

  • Intermountain demographics point to continued in-migration due to high quality of life and low cost of living

     

     

     

     

     

     

     

     

     

     

     

     

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