PwC reports that investor optimism will rise in 2011

March 22, 2011  |  Mark Thomton  |  Print Article  |  Email this Article

Investor confidence is slowly growing in the U.S. as key components of the economy begin to strengthen, causing many to believe that the commercial real estate industry is moving past the bottom of the current cycle reports the first quarter 2011 PwC Real Estate Investor Survey.

As vacancy rates begin to stabilize and even decrease in some markets, owners can expect a slight rental rate increase in key U.S. markets.

According to the national survey of investors, availability rates in the U.S. industrial sector will peak in 2011 as the growing economy sparks tenant demand. The fourth quarter 2010 recorded 3.2 percent annualized GDP growth, and according to Moody’s Economy.com, final sales of domestic product surged 7.1 percent – the largest gain since 1984. This number demonstrates that consumers and businesses are spending.

The PwC survey concludes that as imports and exports increase, a larger portion of industrial stock will enter the expansion phase in 2013 and 2014. Individual industrial markets that are expected to lag this sector as a whole include Tampa, Akron, Cleveland, and Minneapolis.

In the fourth quarter of 2010, the U.S. industrial market’s availability rate decreased 30 basis points to

14.3 percent, marking the second straight quarterly decline, as per CBRE Econometric Advisors. Markets that have reported some of the largest declines in availability over the past year include Salt Lake City (down 250 basis points to7.9 percent), Orange County (down 100 basis points to 10.8 percent), and Baltimore (down 80 basis points to 15.9 percent).

All this activity should equate to a slight rental rate increase for the national industrial market. According to the survey, investors remain conservative with regard to market rent growth over the near term. At 0.40 percent for 2011, the current average remains one of the highest reported for this market in the past eight quarters, but still stands well below the historical peak of 3.23 percent reported just three years ago.

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