Brokers Predict Positive CRE Market in 2019

Participants in Transwestern’s new sentiment survey weigh in on what the New Year will bring for the office, medical office and industrial sectors.

Yet another good year is on the horizon for the commercial real estate market, according to Transwestern’s 2019 Broker Sentiment Survey, even in light of a few uncertainties. Transwestern queried brokers on expectations for office, medical office and industrial properties.

Respondents asserted that sound job growth and solid consumer and business confidence will again bolster fundamentals in all three sectors. And despite minor concerns, survey participants contend that economic growth will play an ongoing role in commercial real estate’s strong performance.

“Based on the recent elections, the likelihood of dramatic political or economic policy changes is low and this paves the way for continued, albeit slower economic growth through a good part of next year,” Elizabeth Norton, managing director of research with Transwestern, said in a prepared statement.

Common threads

In the office sector, vigorous economic activity and increased interest rates will spur greater leasing activity, according to 52 percent of the respondents. Tenant walkthroughs and asking rents will also go on the rise, as predicted by 48 percent of the brokers participating in the survey. Office occupants will maintain their focus on amenities and transportation and parking accommodations will top clients’ lists. Coworking space, however, is expected to be quite low on tenants’ list of highly desired amenities, with only 3.5 percent of respondents indicating that shared accommodations will be very important. 

Participants in Transwestern’s survey foresee the medical sector experiencing many of the same conditions as the traditional office sector in 2019. Leasing activity and tenant walkthroughs will also increase. Rents will rise as well. A whopping 92 percent of respondents believe asking rents will be slightly higher, and the remaining 8 percent suggest the numbers will be flat.

Like the office and medical office sectors, the industrial sector is forecasted to experience a higher level of walkthroughs and rising asking rents. Overall, 2019 is expected to be a good year for industrial—the property type will garner the greatest amount of investor attention among the three sectors. Seventy-two percent of survey respondents indicate that industrial investment sales will be significantly or slightly higher in 2019, while a respective 54 and 60 percent anticipate a significant or higher increase in the office and medical office sectors.

“Industrial continues to attract investors seeking to weather an eventual recession,” Transwestern notes in a recent sector analysis report. “Indeed, the growth of distribution networks to support e-commerce and last-mile delivery will likely sustain industrial demand for another three to five years.”