Kevin May
Director, GRS Group
(310) 614-9329
[email protected]
Third quarter commercial real estate reports are coming in, and two grabbed our attention in particular while sorting through all of the analysis.
The office-leasing arena was extremely robust during the period, according to a JLL dispatch, which said it’s 11.1 percent increase from Q2, hitting 62.4 million square feet, had its best performance in the last two years. One of the biggest reasons for this bump was that leases totaling more than 250,000, were 10.9 million square feet of the total, or 17.5 percent of all transactions.
Rents, though only up 0.2 percent from the second quarter, rose 2.7 percent from same period in 2016. Part of the reason for this, according to JLL, most high-profile assets with costly leases have already been spoken for by tenants.
The only thing that could potentially throw off this strong run is the amount of assets that are about ready for completion, giving tenants more options, potentially creating less of a landlord’s market.
A third-quarter Marcus & Millichap investor survey says that overbuilding is a bit of concern, but most are worried about political uncertainty related to the Trump administration, specifically a tightening on immigration and trade policies. There is also a less favorable overall view of the administration than there was that last time the survey was given, during 2016’s fourth quarter.
Despite that, respondents seem happy with commercial real estate fundamentals. The industrial sector received the most optimism, with 64 percent saying that values will likely increase. More than half felt the same about the multifamily and hotel sectors as well.
More good news is that 81 percent said that job growth should remain as healthy or better throughout next year compared to 2016.
On another macro note, the overall economy, always the most important barometer for the industry, is performing well. GDP growth rose three percent during the third quarter, even with the devastation caused by the major hurricanes that hit the United States and its territories. With a 3.1-percent jump in the second quarter, it was the first time that there were two consecutive three-month periods at three percent or more since 2014.
So, as always, there is reason for pause about the future. The good news is that the economy and the performance of assets industry-wide isn’t showing any current signs of weakness in an increasingly robust economy.
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.