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Commercial real estate markets may show steady growth

Maryland commercial real estate investors and developers may be interested in the opinions of 51 experts who say that the U.S. market will remain strong over the next three years although there will be some changes. The survey, which was conducted by the Urban Land Institute Center for Capital Markets and Real Estate, found that respondents predicted that vacancy rates would continue to drop. The vacancy rate for apartments is already close to its historic low, and it is expected to remain near there. Office, retail and industrial sectors should see even fewer vacancies. Job growth is a significant factory in the drop in vacancy and rise in rent prices.

It is expected that there will be fewer commercial mortgage-backed securities issued and a lower commercial real estate transaction volume. In 2015, there was a post-recession high of $545 billion, and that is expected to drop to $428 billion by 2018

Furthermore, experts predict a decline in commercial real estate pricing. Although the long-term average growth rate is 5.7 percent, prices in the next few years will be considerably below that with 5 percent growth in 2016 dropping to half that amount in 2018. However, overall, the steady growth is expected to also lead to growth in REIT earnings and equity market returns.

Commercial real estate development can be both exciting and complex. As some banks pull out of the financing market, pension and hedge funds and other institutional investors have been taking their place. Developers may want to work with attorneys when they are planning their next project so that they can address these and other issues.

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