2013 Real Estate? Anchored In Uncertainty

Emerging Trends In Real Estate 2013 says the real estate market will continue to recover in 2013, including modest gains in leasing, rents and pricing across all U.S. markets that will improve all property sectors.  But the recovery will be slower than normal due to macro economic forces such as the Euro crisis, dismal GDP growth and government deficits.

PricewaterhouseCoopers and Urban Land Institute have been publishing Emerging Trends in Real Estate for 34 years. They know what they are talking about.

I like this annual report because it’s forward-looking. Most reports look backwards, telling us what happened last year, last quarter or last month. This report is a forecast of real estate investment and development trends. It gives an outlook on real estate finance and capital markets. It breaks down things by property sector and covers metropolitan areas, secondary markets and other real estate matters of interest throughout the U.S., Canada and Latin America.

The report is based on a combination of interviews and surveys from over 900 players in the industry. They are private property company investors, developers, real estate service firms, institutional/equity investors, investment managers, banks, securitized lenders, insurance companies, publicly-traded companies, REITS, homebuilders and residential developers.

If you would like to listen to the publication’s highlights instead of read about them, check out America’s Commercial Real Estate Show.  Michael Bull interviewed the principal authors of Emerging Trends, Mitch Roschelle and Chuck DiRocco. Michael Bull, CCIM has a weekly show on commercial real estate.  I highly recommend it.

Here are some of the highlights of Emerging Trends 2013:

This is the third year in a row that Emerging Trends surveys indicate the real estate market will improve.  And more respondents think the likelihood of improvement this coming year is greater than it was was last year.  We’ve come a long way since the “dog days” of 2008 and 2009.

Respondents described the market’s pace as “muddling-along” and expressed “cautious optimism.” They have abandoned hope for a “big bounce.”

Good but not great job creation will increase absorption and decrease vacancy rates in office, industrial and retail sectors.

Investors view private direct real estate investments and publicly listed property companies or REITS as having the strongest investment prospects by asset class in 2013. Other stocks and bonds trail behind them.

Low interest rates will continue to give the real estate industry breathing room to improve and problems overseas will continue to drive foreign investment in U.S. real estate.

Investors “chasing yield” will continue to bolster real estate assets, which command attractive spreads over fixed-income investments while providing more stability than stocks.

Apartments will lead all property sectors again next year, though “noticeably leveling off.” Over development of apartments is looming in years to come, but not in 2013. Retail will be the laggard again, but recovering.

Industrial/warehouse showed the biggest survey improvements.

Medical office, student housing and self-storage benefit from above-average tenant demand.

Investors will continue to battle for position in the capital stack to achieve the best risk-adjusted