(Realty News Report) – Looking ahead at commercial real estate’s near-term outlook, economists predict expansion, recovery and moderate growth, according to Urban Land Institute’s Spring 2022 Real Estate Forecast.
The semi-annual forecasting exercise tapped 47 economists and analysts at 36 leading real estate investment, advisory and research firms who assessed 27 key indicators for the period of 2022 through 2024.
Recession’s Impact on Real Estate to be Limited
“The projections tell us that although the prospects of a recession have increased, the impact on real estate should be limited,” said ULI Global CEO Ed Walter in prepared remarks.
Regional markets and the build-to-rent segment offer “robust” opportunities, he said. Downtown office markets face challenges, but well-located newer properties could bounce back in the next 12 months.
Many sectors that experienced rebounds in 2021 after hits in 2020 are looking at continued improvement, though at “moderated” levels.
Among the findings and forecasts:
- Transaction volume predictions exceed pre-pandemic highs, calling for $800 billion in 2022, $725 billion in 2023 and $750 billion in 2024.
- 2022 price growth projections land at a “strong” 10 percent, with 6 percent forecast for 2023 and slightly less in 2024.
- Changes in vacancy and availability rates are expected to be minimal across most property types.
Availability will remain low and “essentially plateau,” with annual growth forecasts hovering around 5 percent.
Rents, which reached a 20-year high in 2021, will “notch up further” by 7 percent in 2022 before tempering to 5 percent in 2023 and 4.5 percent in 2024.
Despite a preceding decade of construction, vacancies will remain tight and only “inch up” from the 2.5 percent in 2022 to 2.7 percent in 2023 and 2.9 percent in 2023, slightly below the long term average.
Rents will continue to rise: 7.5 percent in 2022, 5 percent in 2023 and 2.4 percent in 2024.
Office vacancy rates are expected to stay elevated and plateau above their long-term average.
Rents, which grew an average of 4.3 percent before the pandemic, face minimal increases in 2022, 2 percent in 2023 and 2.3 percent in 2024.
A slight increase in availability – 2.9 percent –characterizes 2022-2024. Rent growth, at 1 percent prior to the pandemic, is looking at annual increases of 2 percent in 2022-2024.
Look for occupancy rates of 60 percent, 62 percent and 62.6 percent in 2022 to 2024, respectively. That comes with increases in revenue per available room of 19 percent in 2022, 10 percent in 2023 and 5 percent in 2024.
Projections peg housing starts at 1.2 million in 2022, and 1.25 million in 2023 before a drop to 1.1 million in 2024, a level still above the 20-year average.
Existing home prices will remain strong following the historically elevated levels of 2021 (up 17.6 percent). However, increases are projected at 10 percent in 2022, 5 percent in 2024 and 4.4 percent in 2024, rates more in line with the long-term average.
The Urban Land Institute is a non-profit education and research organization.
May 16. 2022 – Realty News Report Copyright 2022
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File: Recession’s Impact on Real Estate to be Limited. ULI.