North American CRE’s Outlook for 2020

Transwestern Commercial Services and Devencore's 2020 sentiment survey unveils the expectations for the industry’s performance this year.
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Transwestern Commercial Services and Montreal-based Devencore, which formed a strategic alliance in 2018, have released a report indicating that real estate industry professionals in the U.S. and Canada have similar expectations for the New Year. According to results of the partners’ 2020 Commercial Real Estate Sentiment Survey, even amid uncertainties, both the U.S. and Canadian real estate markets are on track for another fruitful year. 

READ ALSO: CBRE 2020 CRE Outlook Is Optimistic 

Participants in the survey predict “cautious expansion” for the commercial real estate industry in the U.S. The office sector garnered a 2020 index average of 106.9—a figure notably higher than the neutral mark of 100—indicating growth on the horizon, albeit at a rate slower than that seen in 2019, when the index was 111.2. Fifty-two percent of respondents expect asking rents to be slightly or significantly higher, but no change is in the forecast for leasing velocity, with 42 percent of respondents anticipating conditions to remain flat. Approximately 70 percent of survey participants expect development to stay flat or be slightly higher.

The U.S. medical office sector, however, is clearly on track for a standout year with an index average of 134.2. Seventy-one percent of those who shared their insight in the survey claim MOB leasing will be slightly or significantly higher and 86 percent predict that construction will be slightly or significantly higher. The strongest vote of confidence for the MOB sector is seen in the area of asking rents, which 100 percent of respondents expect to be slightly higher. 

The industrial sector in the U.S. recorded a minor decrease in the index average from 122.1 in 2019 to 116.2 in 2020, serving as a harbinger of a slowdown in expansion, but an expansion, nonetheless. Most respondents, 45 percent of the group, anticipate that industrial leasing will hold steady. The outlook for rents and development activity is brighter, as a respective 50 and 45 percent of survey participants expect the numbers in both categories to be slightly or significantly higher.

Optimism on both sides of the border

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Survey participants’ positive sentiment expands to Canada. Fifty-seven percent of respondents envision office leasing to be slightly or significantly higher and a whopping 87 percent forecast slightly or significantly higher asking rents. Additionally, 56 percent of the participants predict slightly or significantly higher office development levels. In the industrial sector, conditions vary significantly between regions, but the overall outlook remains encouraging. With regard to leasing velocity and asking rents, a respective 50 and 64 percent of respondents anticipate slightly or significantly higher numbers. Half of the survey-takers foresee that industrial development should remain flat.

As Transwestern and Devencore note pertaining to both the U.S. and Canada, although political turmoil and elevated construction costs have caused CRE growth expectations to decelerate, ongoing economic health and job growth will help maintain the industry’s success.