Report predicts more recovery for commercial real estate, though Cleveland still lags other major cities


by KW Studio City on General October 17th has no comments yet!

CLEVELAND, Ohio — The commercial real estate business will continue its modest recovery in 2013, with apartments leading the way.

That’s the conclusion of a sweeping industry forecast released today by researchers at the nonprofit Urban Land Institute and PricewaterhouseCoopers, one of the Big Four audit firms.

The annual report, based on surveys with more than 900 real estate professionals, shows tempered enthusiasm about commercial real estate, and glimmers of hope for the long-troubled housing market.

“What these findings suggest is that, in general, the industry is moving forward bit by bit,” Stephen Blank, the Urban Land Institute’s senior resident fellow for real estate finance, said in a written statement. “Nothing indicates a quick turnaround for commercial real estate, but it is improving. Those who are patient and willing to rethink their expectations and adapt to market realities are expected to come out ahead this year.”

Among 51 markets evaluated in the survey, Cleveland continues to rank near the bottom. Only Sacramento, Calif.; Las Vegas; and Detroit fared worse, based on respondents’ views of prospects for investment, development and home construction.

But researchers expect more activity in secondary and tertiary cities — the category where Cleveland falls — as competition and real estate prices rise in the most bustling, coastal markets.

San Francisco topped the list of cities, followed by New York; Washington, D.C.; Boston; Seattle; and a handful of cities in California and Texas. Survey participants classified real estate opportunities as “generally poor” in many Midwestern markets.

Apartments remain the industry darling, buoyed by the the housing crisis, young renters, aging Baby Boomers and population shifts into more urban areas. Industrial properties followed, trailed by hotels, then offices, then retail.

On the residential side, investors and developers showed the most interest in urban properties, affordable housing and homes for students and the elderly. The outlook for condominiums, second homes and golf-course communities is poor.

With a better outlook for 2013, investors should put a “substantial” amount of money into commercial real estate, said Mitch Roschelle, a partner and U.S. real estate advisory practice leader at PwC.

“As yield in bonds and other financial instruments tighten in a still volatile market,” he said in a written statement, “commercial real estate’s income producing and total return attributes offer investors potentially attractive risk-adjusted returns.”

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