The weak economy and its related effects will soften the U.S. commercial real estate markets for at least another year, according to the commercial real estate industryÂ's most comprehensive annual forecast, Emerging Trends in Real Estate: 2003.
Rising vacancies, corporate belt-tightening, downward rents and rising expenses will make 2003 a problematic, but manageable, year for investors. It may also extend the recent shallow market downturn, according to the report published annually by Lend Lease and PricewaterhouseCoopers. The expected Emerging Trends scenario is 'doldrums - not despair.' Real estateÂ's attractiveness has been income security, and that security could come under stress the longer the economy remains sluggish. Despite the 'torpid' near term outlook, most indicators point toward a recovery in 2004.
According to the report, real estateÂ's performance remains firmly situated between high-grade bonds and stocks on the risk parameter scale. Returns for 2003 are forecast in the mid to upper single digits and annualized long-term returns (over the next five to seven years) will concentrate in the 7 to 8 percent range. In the face of recent stock market declines, 'the property sector is regaining a large measure of its reputation as a reliable, less mercurial, bond plus investment.'
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(source: Lend Lease)
