A recent report from the Urban Land Institute, a nonprofit group that focuses on the use of land to enhance the environment, predicts an improved commercial real estate market throughout the country over the next few years.
The semiannual study, which is called the ULI/EY Real Estate Consensus Forecast, is designed to provide a forecast on investment returns for property, vacancy rates and other broad economic indicators. Results were based on the answers from economists and analysts at 38 of the nation's premier real estate organizations.
"According to this survey, real estate investors anticipate that the improving U.S. economy will continue to help strengthen real estate markets," said Howard Roth, EY's global real estate leader. "The results are truly promising for commercial real estate and housing sectors, showing increasing confidence going forward."
The results envision the sales volume of commercial property to increase from $300 billion in 2013 to $330 million the next year, followed by an increase to $350 billion in 2015.
"This business over the last several years was focused almost exclusively on maximizing the recovery of distressed assets," William Rogers Jr., chief executive officer of SunTrust Banks Inc., told The Wall Street Journal. "With these problems largely behind us, our recent efforts have been focused on growth."
Banks are opening up wallets to borrowers
Anthony Polini, a banking-sector analyst with Raymond James Financial Inc., told The Wall Street Journal "more banks are on the offense, not on defense anymore."
Polini believes that thought process has opened up the floodgates for people hoping to make a splash in the commercial investing market.
SNL Financial, a real estate research firm, has data to back Polini's claim.
According to the research firm, there was a 2.4 percent increase in total commercial real estate loans last year, marking the first growth in the sector in four years.
"(Commercial real estate is) definitely becoming a significant driver of loan growth," said Kevin Barker, an analyst with Compass Point Research & Trading. "To the extent that the banks can take advantage, it could be a tailwind to earnings."
SNL Financial reported that as of June 30 of this year, commercial real estate loans reached $991.2 billion, which represents an increase of more than 3 percent from the year prior.
"The commercial-real-estate business continues to grow strongly," said Marianne Lake, the chief financial officer at J.P. Morgan.
Lake said loans in the commercial sector have grown every month for the past 13 months.