This month we saw a variety of reports being released, analyzing 2015’s real estate market. While a lot can be said about both commercial and residential in the past year, a major focus of these reports was the growth of commercial real estate in the U.S. Real Capital Analytics released a compilation of data earlier this month, reflecting on transactions involving income-producing properties in the past year. While we didn’t see growth across each sector, the percent increase in other areas compensated for the slack.
Yahoo Finance recently published an article reflecting on this data from Real Capital Analytics. The data, which is comprised of commercial real estate transactions greater than $2.5M, is broken down into six different sectors. The sector which saw the biggest growth in transaction dollar volumes came from the industrial market. According to CBRE, the industrial availability rate has been falling for 23 consecutive quarters now.
Not surprisingly, retail real estate saw a decrease in closed volume coming out of 2015. The market is seeing a steady growth in online shopping which could attest to the decrease in growth we saw in the past year. However, studies suggest that with lower gas prices and an improving labor market consumer spending should grow; thus, retail real estate is expected to see some growth in the coming quarters. In Yahoo’s article, the vice president of Real Capital Analytics, Jim Costello states, “Retail is still having some trouble. We have a lot of retail that just doesn’t make sense anymore given the location in terms of the big-box activity and all the competition form the Internet as well.”
Overall the commercial real estate market saw an accumulative growth of 16% in 2015, amounting to a total of $503.7 billion in transactions. These figures are causing quite the celebration as it has been the most we’ve seen since before the financial crisis. Most experts believe that with the change in the Foreign Investment in Real Property Tax Act this past year, we’re sure to see continued growth in quarters to come. I believe that although there are competing factors, such as availability rates in certain markets, we are continuously seeing real estate developments in up-and-coming markets nationwide. Ultimately, 2015 was a major indicator of the rapid growth in commercial real estate and 2016 will likely follow suit.