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Just Released: Viewpoint 2018 Jan 29, 2018

Just Released: Viewpoint 2018

FOR IMMEDIATE RELEASE

Integra Releases Annual Viewpoint Report:

Cautiously Optimistic Outlook for CRE into 2018

Signature Report Highlights National Property Trends & Forecasts Across All Property Sectors, Plus Specialty Property Reports on Marijuana, Senior Housing, Golf & Caribbean Hospitality

DENVER, CO — (January 29, 2018) — After years of unprecedented growth, the commercial real estate outlook is cautiously optimistic, with moderate, steady growth forecasted for the year ahead, according to Integra Realty Resources' (IRR) signature Viewpoint 2018 publication. The annual report provides a detailed overview of the local and national commercial real estate market across five key property types including, office, industrial, retail, hospitality, and multifamily. Viewpoint 2018 also examines trends from the economy, interest rates, capital markets, and housing and how these trends will affect commercial real estate markets in the year ahead. This year’s specialty property sector analysis covers the emerging Marijuana Real Estate sector, Senior Housing, Golf Courses and Caribbean Hospitality.

“For 25 years, our clients have relied on this report to make more informed commercial real estate decisions,” said Anthony M. Graziano, MAI, CRE, Chairman of Integra Realty Resources. “Whether or not the economy can maintain forward motion is the definitive question in the year ahead. In this year’s report, we explore the major factors impacting continued economic expansion and a few of the key challenges and opportunities that face the commercial real estate market.”

The highly anticipated report was produced in partnership with well-known veteran commercial real estate economist, Hugh F. Kelly, PhD, CRE, who added, “In the short term, we find the commercial property markets solidly in their ‘expansion phase’ in most areas of the country, but now is the time for real estate owners and investors to begin thinking about defense strategies. However, it should be a less severe downside for the commercial real estate industry than the downturn in 2008 thanks to more disciplined buyers.”

IRR Viewpoint 2018 Highlights

2018 National Themes

  • While 2018 will see continued economic growth, signs of excess that trigger market corrections are starting to accumulate. Tracking three “final demand predictors,” essentially limits to further economic development, including: job growth, which has been shifting into lower gear; incomes, which aren’t rising enough to spur the final predictor, consumer spending.
  • Housing, interest rates and the 2017 Tax Act: Gradually increasing interest rates and new limits on the deductibility of mortgage interest will negatively impact new homebuyers.
  • Shifts in the economy benefit some property types, for example, continued growth of service and e-commerce sectors have bolstered demand for office and warehouse properties.
  • Cautionary capital markets: Even with a slower market, commercial property prices rose on average 8.4%, suggesting more careful selection rather than any withdrawal of capital is what is shaping the commercial real estate investment marketplace.

Office

  • The office sector posted another year of solid absorption. Heading into 2018, 48.4% of suburban markets are in expansion, the highest since the financial crisis. The shift from downtown to suburban properties reflects a realization that CBDs have essentially become fully priced.
  • The decline in office transaction volume, an overall drop of 6% to $94.5 billion through the first three quarters of 2017 is evidence of greater buyer discipline.
  • Top Markets (ranked by year-over-year transaction growth rate):
    • 1) Houston, TX
    • 2) Memphis, TN
    • 3) Columbus, OH
    • 4) Westchester, NY
    • 5) Cleveland, OH
  • 2018 Outlook: More markets expect cap rate increases in 2018 than in years past. Expense growth rates are forecasted to increase by 2.5% in 2018. Values are expected to increase more than 2% in 38% of markets.

Industrial

  • Driven by Ecommerce and global trade, this sector continues to be a capital magnet. Entering 2018, the industrial property sector has outperformed all other property types with their double-digit total returns, high absorption rates, rising occupancy and rent growth.
  • From 1Q through 3Q 2017, industrial transactions totaled $51.8 billion, up 23% over the same period in 2016, and up 18% in deal count (4,866).
  • The majority of national markets (83%) are in expansion mode. Four markets are expecting 5% market rent growth: Cleveland, OH; Hartford, CT; Naples, FL; and Seattle, WA.
  • Top Markets (ranked by YOY transaction growth rate):
    • 1) Kansas City, MO 
    • 2) Westchester, NY
    • 3) Sacramento, CA
    • 4) Birmingham, AL
    • 5) DC Metro
  • 2018 Outlook: More than half (57%) of industrial markets are ‘in balance’ compared with 41% of flex industrial markets. On average, industrial markets are calling for a 2.64% increase in market rents and 2.55% increase in expense growth rates through 2018. Only 15% of industrial markets are in the recovery market phase.

Retail

  • Retailers continue to be disrupted by ecommerce, along with shifting demographics and consumer spending habits. Trading velocity continues to slow in retail sector.
  • Aggressive asset management versus portfolio growth is the key to success for retail investors.
  • Retail transactions totaled $46.9 billion through 3Q 2017, a decrease of 19% from the year before. The largest drop in transaction volume ($15.8 billion) was in the East region.
  • Majority of markets in the West region (78.6%) are in expansionary market cycle phase.
  • Top Markets (ranked by YOY transaction growth rate):  
    • 1) Las Vegas, NV 
    • 2) Stamford, CT
    • 3) Broward, FL
    • 4) Austin, TX
    • 5) Hartford, CT
  • 2018 Outlook: More than half (66%) of national markets are considered ‘in balance’ and an additional 25% are within two years of becoming ‘in balance.’ On average, markets are expecting a 2.2% increase in retail market rents in the next 12 months. With strong cap rate compression in prior years, 74% of markets expect cap rates to remain stable in 2018.

Hospitality

  • After several surging years during an eight-year bull cycle, the hotel market appears to be losing momentum. Fundamentals remain strong enough to forecast stable, but slow growth through 2018.
  • Hospitality transaction volume slipped in the past year to $31 billion through Q3 2017, down 25% from the previous year.
  • The majority (90%) of markets nationally are in expansionary market cycle phase.
  • Top Markets (ranked by YOY transaction growth rate):
    • 1) Charlotte, NC
    • 2) Broward, FL
    • 3) NYC Boroughs
    • 4) Memphis, TN
    • 5) Jacksonville, FL
  • 2018 Outlook: IRR anticipates asset value growth in 75% of hotel markets. Cap rates are forecasted to remain constant in 71% of markets. Market rents will grow at 3.3% in 2018.

Multifamily

  • The rental apartment sector continued to push forward. Single-family housing sector slowed as employment growth decelerated.
  • Overall transaction volume from 4Q 2016 to 3Q 2017 was $150.6 billion, down year-over-year by 9.8%.
  • The vast majority of markets (91.9%) are in expansion phase. A shift to hypersupply is being seen in Baltimore, Washington, DC, and Atlanta, where there is strong development volume.
  • Top Markets (ranked by YOY transaction growth rate):
    • 1) Salt Lake City, UT
    • 2) Stamford, CT
    • 3) Portland, OR
    • 4) Pittsburgh, PA
    • 5) San Antonio, TX
  • 2018 Outlook: Market rents will increase on average by 2.45%. Uptick in number of markets (24%) that are forecasting higher cap rates. Approximately 10% of markets are expected to post 4% or higher value increases in 2018.

IRR Viewpoint 2018 can be downloaded for free from IRR's website here. For more information about this year’s report, or to access additional IRR research, please visit www.IRR.com

Locate an office

Each IRR office is led by an MAI-designated Senior Managing Director, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets.
Click to zoom in/out Denver, CO 11049 West 44th Avenue
Suite 101
Wheat Ridge, CO 80033
Phone: 720-833-5930
Fax: 303-951-1924
Boston, MA IRR-Corporate
Boston, MA 02109
Phone: 212-255-7858
Fax: 646-424-1869
Seattle, WA 600 University Street
Suite 310
Seattle, WA 98101
Phone: 206-903-6700
Fax: 206-623-5731
Portland, OR IRR-Corporate
Portland, OR 97205
Phone: 212-255-7858
Fax: 646-424-1869
Boise, ID RiverWalk Center
1661 W. Shoreline Dr. Suite 200
Boise, ID 83702
Phone: 208-342-2500
Fax: 208-342-2220
Salt Lake City, UT 5107 South 900 East
Suite 200
Salt Lake City, UT 84117
Phone: 801-263-9700
Fax: 801-263-9709
Las Vegas, NV 8367 West Flamingo Road
Suite 100
Las Vegas, NV 89147
Phone: 702-869-0442
Fax: 702-869-0955
Phoenix, AZ 5225 North Central Ave.
Suite 235
Phoenix, AZ 85012
Phone: 602-266-5599
Fax: 602-266-1515
Sacramento, CA 3825 Atherton Road
Suite 500
Rocklin, CA 95765
Phone: 916-435-3883
Fax: 916-435-4774
San Francisco, CA 315 Montgomery Street
9th Floor
San Francisco, CA 94104
Phone: 415-715-4690
Fax: 916-435-4774
Metro LA 16030 Ventura Boulevard
Suite 620
Encino, CA 91436-4473
Phone: 818-290-5400
Fax: 818-290-5401
Los Angeles, CA 16030 Ventura Boulevard
Suite 620
Encino, CA 91436-4473
Phone: 818-290-5400
Fax: 818-290-5401
Orange County, CA IRR-Corporate
Laguna Hills, CA 92653
Phone: 212-255-7858
Fax: 646-424-1869
San Diego, CA 5330 Carroll Canyon Road
Suite 100
San Diego, CA 92121
Phone: 858-259-4900
Fax: 858-259-4910
Miami, FL 9155 S. Dadeland Boulevard
Suite 1208
Miami, FL 33156
Phone: 305-670-0001
Fax: 305-670-2276
Naples, FL 2770 Horseshoe Drive S
Suite 3
Naples, FL 34104
Phone: 239-643-6888
Fax: 239-643-6871
Tampa, FL 550 North Reo Street
Suite 220
Tampa, FL 33609
Phone: 813-287-1000
Fax: 813-281-0681
Orlando, FL 326 North Magnolia Avenue
Orlando, FL 32801-2431
Phone: 407-843-3377
Fax: 407-841-3823
Jacksonville, FL IRR-Corporate
Jacksonville, FL 32217
Phone: 212-255-7858
Fax: 646-424-1869
Charleston, SC 11-C Isabella Street
Charleston, SC 29403
Phone: 843-718-2125
Fax: 843-718-2058
Atlanta, GA 5256 Peachtree Road
Suite 115
Atlanta, GA 30341
Phone: 404-418-4358
Fax: 404-418-4357
Birmingham, AL 880 Montclair Road
Suite 275
Birmingham, AL 35213
Phone: 205-949-5995
Fax: 205-271-2389
Jackson, MS 617 Renaissance Way
Suite 100
Ridgeland, MS 39157
Phone: 601-714-1665
Fax: 601-500-5314
Dallas, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-881-7191
Fax: 972-733-1403
Fort Worth, TX 7080 Camp Bowie Boulevard
Fort Worth, TX 76116
Phone: 817-763-8000
Fax: 817-763-8017
Austin, TX 401 Congress Avenue
Suite 1540
Austin, TX 78701
Phone: 512-924-1345
Fax: 646-424-1869
Memphis, TN 1661 International Drive
Suite 330
Memphis, TN 38120
Phone: 901-322-1701
Fax: 901-767-4918
Tulsa, OK IRR-Corporate
Tulsa, OK 74136
Phone: 212-255-7858
Fax: 646-424-1869
Kansas City, MO/KS IRR-Corporate
Westwood, KS 66205
Phone: 212-255-7858
Fax: 646-424-1869
Providence, RI 365 Eddy Street
Providence, RI 02903
Phone: 401-273-7710
Fax: 401-273-7410
Syracuse, NY 120 East Washington Street
Suite 525
Syracuse, NY 13202
Phone: 315-422-5577
Fax: 315-422-5295
Hartford, CT 97 Broad Street
Middletown, CT 06457
Phone: 860-291-8997
Fax: 401-273-7410
New York, NY IRR-Corporate
New York, NY 10036
Phone: 212-255-7858
Fax: 646-424-1869
Northern New Jersey 301 South Livingston Avenue
Suite 104
Livingston, NJ 07039
Phone: 973-422-9800
Fax: 973-422-9797
Coastal New Jersey 1415 Hooper Ave.
Suite 306
Toms River, NJ 08753
Phone: 732-244-7000
Fax: 732-505-9498
Philadelphia, PA 995 Old Eagle School Road
Suite 307
Wayne, PA 19087
Phone: 610-238-0238
Wilmington, DE IRR-Corporate
Wilmington, DE 19805
Phone: 212-255-7858
Fax: 646-424-1869
Baltimore, MD The Yards
700 Pennsylvania Ave, SE, Suite 200
Washington, DC 20003
Phone: 202-601-4146
Fax: 646-424-1869
Washington, DC The Yards
700 Pennsylvania Ave, SE, Suite 200
Washington, DC 20003
Phone: 202-601-4146
Fax: 646-424-1869
Pittsburgh, PA 3535 Boulevard of the Allies
Pittsburgh, PA 15213
Phone: 412-683-2211
Fax: 412-683-2220
Cleveland, OH 850 Euclid Ave.
Suite 952
Cleveland, OH 44114
Phone: 330-659-3640
Fax: 330-659-3640
Columbus, OH 6241 Riverside Drive
Dublin, OH 43017
Phone: 614-764-8040
Fax: 614-764-8050
Saint Louis, MO 16759 Main Street
Suite 209
St. Louis, MO 63040
Phone: 636-530-0009
Fax: 636-530-0046
Chicago, IL 400 E Randolph St.
Suite 715
Chicago, IL 60601
Phone: 312-565-0977
Fax: 312-565-3436
Minneapolis, MN 8012 Old Cedar Avenue South
Minneapolis, MN 55425
Phone: 612-339-7700
Fax: 612-339-7937
Nashville, TN 1894 General George Patton Drive
Suite 300
Franklin, TN 37067
Phone: 615-628-8275
Fax: 615-628-8286
Richmond, VA 7110 Forest Avenue
Suite 202
Richmond, VA 23226
Phone: 804-346-2600
Fax: 804-747-9140
Greensboro, NC 5411-A Friendly Avenue
Greensboro, NC 27410
Phone: 336-676-6033
Fax: 336-676-6025
Raleigh, NC 8382 Six Forks Road
Suite 200
Raleigh, NC 27615
Phone: 919-847-1717
Fax: 919-847-1714
Charlotte, NC 214 W. Tremont Ave.
Suite 200
Charlotte, NC 28203
Phone: 704-376-0295
Fax: 704-342-3704
Columbia, SC 500 Lawand Drive
2nd Floor
Columbia, SC 29210
Phone: 803-772-8282
Fax: 803-772-0087
Cincinnati/Dayton, OH 8241 Cornell Road
Suite 210
Cincinnati, OH 45249
Phone: 513-561-2305
Fax: 513-561-2881
Detroit, MI 400 W. Maple Road
Suite 100
Birmingham, MI 48009
Phone: 248-540-0040
Fax: 248-540-8239
Indianapolis, IN 4981 North Franklin Road
Indianapolis, IN 46226
Phone: 317-546-4720
Fax: 317-546-1407
Louisville, KY 13000 Equity Place
Suite 105
Louisville, KY 40223-3976
Phone: 502-452-1543
Fax: 502-451-3657
Caribbean Cayman Business Park #A5, P.O. Box 751
Grand Cayman, Cayman islands
Camana Bay, KY KY1-9006
Phone: 844-952-7304
Houston, TX 9225 Katy Freeway
Suite 206
Houston, TX 77024
Phone: 713-973-0212
Fax: 713-973-2028
San Antonio, TX 909 NE Loop 410
Suite 636
San Antonio, TX 78209
Phone: 210-446-4444
Puerto Rico 508 Asuncion St.
Puerto Nuevo Development
San Juan, PR 00920
Phone: 844-952-7304
New Orleans, LA 643 Magazine Street
Suite 330
New Orleans, LA 70130
Phone: 504-291-9019
Little Rock, AR 8201 Ranch Boulevard
Building B1, Office 6
Little Rock, AR 72223
Phone: 501-476-5561