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2018 North America and Europe commercial real estate forecast

Rapid change is underway in the world's commercial real estate industry, and the dynamics are in ... Minneapolis, Nashville, New Jersey, New York, Oakland, Orange County, Orlando, Philadelphia, Phoenix, Pittsburgh, Raleigh-Durham, Reno, Sacramento, San ...

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Notable U.Soffice market highlights include: Avison Young is tracking 5.2 billion square feet (bsf) of office inventory in 46 U.Smarkets that had an overall vacancy rate of 11.8% at the end of 2017, mirroring office vacancy in Canada, and falling 10 bps from year-end 2016's 11.9% rateU.Svacancy is forecasted to increase slightly to 12% by year-end 2018. • San Francisco is forecasted to be the tightest U.Soffice market in 2018 with a 5.8% vacancy rate, a repeat of the market's 2017 performance. • The five largest office markets (New York, Philadelphia, Washington, DC, Chicago and Dallas) are all forecasting vacancy to rise, to a minor degree, by year-end 2018. • There was 103 msf under construction in the U.Sat year-end 2017 with the following five markets accounting for roughly half of that total: New York (15.3 msf); Washington, DC (11.6 msf); Dallas (8.7 msf); San Jose/Silicon Valley (7.8 msf) and San Francisco (6 msf). • Office space under construction is 55% preleased with tenants demonstrating demand for new well-located and amenity-rich product The report goes on to say the rate of growth in e-commerce outpaced that of overall retail sales, and analytics will play a greater role as retailers embark on targeted and automated marketing campaignsThe need for omni-channel retailing has not abated, and successful retailers' offerings include experiential retail and strong digital storefronts with speedy delivery. Notable U.Sindustrial market highlights include: • The U.Sindustrial market's growth is being fueled by logistics and distribution needs related to growing adoption of e-commerce and bridging the last mile in the supply chainData redundancy, technology and distribution have all contributed to driving vacancy lower, pushing rents higher and spurring a considerable amount of new industrial developmentBig data and the Internet of Things will further push demand for data centers in this sector. • As 2017 drew to a close, the U.Sindustrial sector totaled 11.2 bsf and reported an overall vacancy rate of 5.2 % – a 10-bps dip from year-end 2016Another 188 msf of new construction is underway. • Four U.Smarkets dominate industrial development in North AmericaDallas ranks first in the country with more than 21.5 msf under construction (37% preleased), followed by Philadelphia with 17.7 msf (36.1% preleased), Atlanta with 16.5 msf (17% preleased) and New Jersey with 14.3 msf underway (54.6% preleased). • U.Sindustrial vacancy is expected to rise slightly to approximately 5.4% at the end of 2018 while 19 markets are forecasting vacancy to fall year-over-year. Supported by a period of historically low interest rates, investment sales volume rose each year between 2009 and 2015In 2015, total volume nearly reached the 2007 peak of $572 billion on the back of a slate of megadeals and portfolio salesAfter falling by 9% year-over-year in 2016, transaction volume in 2017 trended still lower through November 2017Nevertheless, pricing was supported and an abundance of capital chased available dealsSelect U.Smarkets also reported significant, or historic, sale pricesSpecific asset classes and key markets are performing well and this trend is expected to be amplified in 2018. "There is no question about the global appetite for industrial investments," says John Kevill, Principal and Managing Director of U.SCapital Markets for Avison Young"With attractive financing options persisting and new tax legislation taking effect, capital markets should maintain their strength in 2018 – with even more real estate exposure possible from private investorsOf course, markets thrive on clarity; and with several macroeconomic shifts underway across all product classes, we expect that demand will continue to be strongest for well-established properties and institutional-quality offerings." After China led foreign investment in the U.Sin 2016, Canada reclaimed top spot, by far, with more than $15 billion invested at year-end 2017Including Singapore, China, the Netherlands and Germany, the top five countries accounted for $34 billion in cross-border capital investment in the U.Sin 2017. "We expect several factors to influence real estate occupancy and capital-markets activity in 2018," adds Webb"Real estate will provide attractive yields relative to stock-and-bond alternatives as the growth rate of the stock market should slow from that of 2017." He concludes: "Essentially, we expect rental stability to prevail in most marketsAlthough transaction volume will decline again, by as much as 10% to 15% in major markets, pricing should be buoyed by capital demands from all investors, thus offsetting any slight increases in borrowing costs." 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