Broader markets continue to stabilize as employment growth remains the key driver for the economy and commercial real estate. Jobs are forecasted to gain almost 300,000 per month for 2015, setting pace for an additional 3.5 million jobs by year end.
Household income change starts to show light for this year as 2015 has a projected annual jump of 3.3 percent. This combined with gas price declines should assist with personal spending, all positives for the industry.
As single-family home starts remain controlled, housing formations show life in 2015 outpacing housing starts. This trend is projected to continue throughout 2018 and should provide an additional tailwind for the economy.
Interest rate changes and when remain the million dollar questions. Many economists project early June, however, the latest Fed meetings offered signs of something further out in 2015. Either way cap rates in all sectors still have decent margins to cushion rate hikes.
Even as prices exceed pre-recession levels in certain markets, institutional investors are still closing deals in primary markets. Plenty of opportunities do exist though in the secondary and tertiary arenas, as population increases and individuals migrate for more affordable living and employment.
Within the four major property sectors, absorptions outpacing completions are seen in the retail and office space for 2015. As industrial and apartments have larger pipeline forecasts. Vacancy rates in our sample markets show the strongest compression in retail, as only the San Francisco apartment market shows any decline in rates.