Economist Predicts the U.S. Real Estate Market Will Remain Steady in the Coming Year
December 4, 2015
With 2016 around the corner, industry leaders are analyzing the current market to predict what lies ahead for the commercial real estate market in the coming year. It has been established that the Fed will finally raise interest rates in the closing month of 2015 and beyond, but CBRE global chief economist and executive director, Richard Barkham, Ph.D, predicts that the rise in rates will have a minimal impact on commercial real estate in 2016. In a discussion with NREI, Barkham explains the rates will be low and measured and the market has anticipated the increase for some time; the slow and gradual increase should have little bearing on real estate in the next 12 months. He elaborated that the recovery in North America and Europe, which make up a large portion of the global economy, has been reasonably solid, further validating that the industry is posed and ready for this gradual incline.
Barkham also predicts the Multifamily sector will be a big leader in commercial real estate for 2016. The reduction in homeownership continues to increase the demand for rentals, and the cyclical uplift of this sector is expected to continue generating good rental rate growth over the course of the year.
While Barkham is generally optimistic for 2016, he remains cognizant of the unpredictability of the global market, particularly with the slowdown in China, where he predicts there will be a continuation of negative news out of China for at least another nine months. This could lead to trade shock in debt-burdoned merging markets where a strong dollar would have an intensely negative impact. Overall, there is confidence that there will be rental rate growth in all sectors of between 2 and 4 percent, and probably further cap rate compression.