Stable economic growth with low interest rates, punctuated by bursts of pessimism and volatility—the factors that have characterized the world economy for the past few years—are likely to continue in 2016, promoting moderate growth in commercial rents and investment sales volume globally, according to CBRE Group's newly released 2016 Global Real Estate Market Outlook. apartment for sale in pearl qatar
"The current climate of variable but generally improving growth in the developed world, combined with low interest rates and low inflation, is very supportive of consumers and commercial real estate markets," CBRE's global chief economist Richard Barkham said. "There are some threats, such as declining sentiment due to volatile stock markets, increasing interest rates in the United States and the United Kingdom, financial stress in emerging markets, and the Chinese economy slowing down. However, since consumers in the United States, Europe, and even China are in good shape, we believe the global economy will be able to withstand these challenges, and that real estate and economic reality in most places will be better than anticipated in 2016."
The International Economic System
According to CBRE, 2016 will be a year of fluctuating markets and steady economic growth. Consumers in the United States, the European Union, and many parts of Asia Pacific are spending gains from growing wages, low interest rates, and low oil prices, which should help sustain overall global GDP growth, which Oxford Economics predicts will be 2.6 percent this year. There are threats, including the possibility of an emerging market debt crisis, more yuan depreciation, and continued volatility in global stock markets. In the worst-case scenario, these events will stifle economic growth, but they are unlikely to trigger a major recession because interest rates will remain low for longer.
Rents for Commercial Properties
According to CBRE's Global Rent Index, global prime rents across the three major property types—office, manufacturing, and retail—are forecast to rise 2.2 percent annually in 2016. Commercial real estate rents are expected to rise 3.4 percent in the Americas in 2016, thanks to the strength of the US property market, as consumption growth and increasing jobs, coupled with comparatively limited new supply levels, should stimulate demand. Rents in EMEA are expected to rise by 3.2 percent as a result of increased consumer spending, pent-up demand for commercial space, and the European Central Bank's expected further monetary easing. Rent growth in Asia Pacific is expected to remain flat, owing to the region's economic slowdown and oversupply in some markets.
Markets for Capital
After six years of recovery and price appreciation, global commercial real estate investment markets are expected to remain active in 2016. However, the rate of growth is expected to decline in 2016. In local currency terms, CBRE expects global investment sales volumes to increase by 4% in 2016. Low borrowing rates and steady rent growth should keep commercial real estate investments appealing to investors, and the "wall of money" is expected to remain significant. Overall, there will be downward pressure on cap rates, but it will be less intense than in recent years due to increasing US interest rates and the possibility of weaker asset demand from oil-dependent economies.
Workplace
The majority of office markets in the United States and Europe are expected to tighten even further in 2016, as demand for space is expected to outpace limited new growth. The scale of tightening in individual cities, on the other hand, would be largely determined by local job growth in major office-using industries. Cost-conscious occupiers, struggling with the effects of the region's economic downturn, will scale back leasing operation in Asia Pacific office markets, despite a boom in new supply in India, China, and Indonesia.
Consumer confidence is at its highest level in nine years, and growing incomes are expected to help stronger retail sales, which are expected to rise 6.6 percent globally in 2016, according to eMarketer. CBRE expects demand for retail space to pick up this year. To contend with e-commerce, successful brick-and-mortar retailers and mall owners are implementing new experience-driven "place-making" strategies that include enhanced food-and-beverage offerings, better entertainment options, and improved customer service.
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In 2016, the industrial and logistics industry will continue to be reshaped by strong demand for warehouse and storage space from e-commerce and third-party logistics firms. According to eMarketer, e-commerce revenues are projected to rise 23% in 2016, indicating that demand for modern "big-box" facilities will remain high. To meet the customer demands for same- and next-day delivery of online orders, many logistics users would pursue smaller in-fill industrial facilities within major metros.
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Because of easier mortgage availability and declining unemployment, house prices are rising at their highest pace since the Global Financial Crisis, a development that CBRE expects to continue for some time. This is also true in China, where house prices in tier-one cities are projected to rise in 2016, amid the Chinese economy's overall slowdown. The multifamily market in the United States should remain strong due to continued strong demand for rental apartments, but vacancy rates will likely rise due to a significant increase in new supply expected to arrive in 2016.