Recently, the ULI Real Estate Economic Forecast was released with the 2018 Fall edition, citing the expert opinion of industry-leading real estate economists and analysts. The report includes a forecast for the remainder of this year, as well as the next two, 2018-2020. We look at some of the key take-aways for the industry, both positive and less-so in today’s BAM blog…

  • Apartment and office vacancy rates are predicted to plateau in 2018, before rising again next year and in 2020.
  • Annual transaction volume is predicted to decrease from the high seen in 2015 ($569 billion) to $475 billion in 2018 and to $415 billion in 2020.
  • Unemployment is expected to decline further in 2018, reaching 3.8% by the end of the year, leveling off in 2019, and rising by the end of 2020 to 4.0%.
  • Similarly, job growth is predicted to rise in 2018 to 2.40 million jobs before adjusting to 1.0 million jobs in 2020.
  • Ten-year treasury rates are expected to rise to 3.0% by the end of 2018, 3.3% in 2019, and 3.5% in 2020.
  • The CPI inflation rate is expected to be above the long-term average for the next three years: 2.5% in 2018 and 2019 and at 2.4% in 2020.
  • Equity REIT total returns were below the 20-year average. Returns are predicted to be positive for the next three years but below the long-term average: 4.0% for 2018, 2019, and 4.2% in 2020.
  • The forecast for apartment rent growth and vacancy rates has improved from six months ago for 2018 and 2019; however, it remains the same for 2020.
  • Vacancy rates were at 4.9% in 2017 and are predicted to hit 5.2% in 2020.
  • Rental rate growth stayed positive for eight straight years beginning in 2010, and is anticipated to hit 2.9% in 2018, before dropping to 2.5% in 2019, and 2.0% in 2020.
  • For single-family homes, growth is expected to continue but remain below the long-term average.
  • The forecast for both housing starts and existing house price growth is less optimistic than it was six months ago for all three years.

Some good news predicted for 2020 – For the “better than long-term averages”: unemployment rate, transaction volume, vacancy rates for apartments, and rental growth for industrial properties.

Some less auspicious news expected for 2020 – For the “worse than long-term averages”: employment growth, GDP growth, apartment/office/retail rental growth, REIT total returns, CPPI growth, retail availability.

To see the forecast in its entirety, click the above link and download the PDF version of the report. The BAM Bottom Line: There will likely be challenges, and not always smooth sailing ahead, but overall there is plenty to be optimistic about in the real estate industry, and specifically the multifamily market, over the forecast time period.