New Urban Land Institute Survey, ULI Real Estate Consensus Forecast, Projects Improvements for the Real Estate Industry Through 2014


Survey is Based on Opinions from 38 of the Nation’s Leading Real Estate Economists and Analysts

WASHINGTON, DC – March 28, 2012 – (RealEstateRama) — A new Urban Land Institute survey of 38 leading real estate economists and analysts from across the United States projects broad improvements for the nation’s economy, real estate capital markets, real estate fundamentals and the housing industry through 2014. The findings, released today, mark the start of a semi-annual survey of economists, the ULI Real Estate Consensus Forecast, being conducted by the ULI Center for Capital Markets and Real Estate. The survey results show reason for optimism throughout much of the real estate industry. Over the next three years:

  • Commercial property transaction volume is expected to increase by nearly 50 percent
  • Issuance of commercial mortgage-backed securities (CMBS) is expected to more than double
  • Institutional real estate assets and real estate investment trusts (REITs) are expected to provide returns ranging from 8.5% to 11% annually
  • Vacancy rates are expected to drop in a range of between 1.2 and 3.7 percentage points for office, retail, and industrial properties and remain stable at low levels for apartments; while hotel occupancy rates will likely rise
  • Rents are expected to increase for all property types, with 2012 increases ranging from 0.8 percent for retail up to 5.0 percent for apartments;
  • Housing starts will nearly double by 2014, and home prices will begin to rise in 2013, with prices increasing by 3.5% in 2014

These strong projections are based on a promising outlook for the overall economy. The survey results show the real gross domestic product (GDP) is expected to rise steadily from 2.5 percent this year to 3 percent in 2013 to 3.2 percent by 2014; the nation’s unemployment rate is expected to fall to 8.0 percent in 2012, 7.5 percent in 2013, and 6.9 percent by 2014; and the number of jobs created is expected to rise from and expected 2 million in 2012 to 2.5 million in 2013 to 2.75 million in 2014. The improving economy, however, will likely lead to higher inflation and interest rates, which will raise the cost of borrowing for consumers and investors. For 2012, 2013 and 2014, inflation as measured by the Consumer Price Index (CPI) is expected to be 2.4 percent, 2.8 percent and 3.0 percent, respectively; and ten-year treasury rates will rise along with inflation, with a rate of 2.4 percent projected for 2012, 3.1 percent for 2013, and 3.8 percent for 2014.

The survey, conducted during late February and early March, is a consensus view and reflects the median forecast for 26 economic indicators, including property transaction volumes and issuance of commercial mortgage-backed securities; property investment returns, vacancy rates and rents for several property sectors; and housing starts and home prices. Comparisons are made on a year-by-year basis from 2009, when the nation was in the throes of recession, through 2014.

While the ULI Real Estate Consensus Forecast suggests that economic growth will be steady rather than sporadic, it must be viewed within the context of numerous risk factors such as the continuing impact of Europe’s debt crisis; the impact of the upcoming presidential election in the U.S. and major elections overseas; and the complexities of tighter financial regulations in the U.S. and abroad, said ULI Chief Executive Officer Patrick L. Phillips. “While geopolitical and global economic events could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvement over the next three years. These results hold much promise for the real estate industry.”

The survey results suggest a marked increase in commercial real estate activity, with total transaction volume expected to rise from $250 billion in 2012 to $312 billion in 2014. CBMS issuance, a key source of financing for commercial real estate, is expected to jump from $40 billion in 2012 to $75 billion in 2014 (a considerable increase from the recession’s low point of $3 billion in 2009).

Total returns for equity REITs are expected to be 10 percent in 2012, 9 percent in 2013 and 8.5 percent in 2014, a sharp decrease from the surging REIT returns of 28 percent in both 2009 and 2010, but settling closer to the more sustainable level seen in 2011.Total returns for institutional-quality real estate assets, as measured by the National Council of Real Estate Investment Fiduciaries Property Index, have also been strong over the past two years and these returns are expected to remain healthy, providing returns of 11% in 2012, 9.5% in 2013, and 8.5% in 2014.

“Commercial real estate returns for institutional quality and REIT assets have performed very well in recent years, and this performance is expected to remain strong but trend lower over the next three years,” said Dean Schwanke, executive director of the ULI Center for Capital Markets and Real Estate.
A slight cooling trend in the apartment sector – the investors’ darling for the past two years – is seen in the survey results, with other property types projected to gain momentum over the next two years. By property type, total returns for institutional quality assets in 2012 are expected to be strongest for apartments, at 12.1 percent; followed by industrial, at 11.5 percent; office, at 10.8 percent; and retail, at 10 percent. By 2014, however, returns are expected to be strongest for office, at 10 percent, and industrial, at 10 percent; followed by apartments at 8.8 percent and retail at 8.5 percent.

  • Apartments – The forecast predicts a modest increase in vacancy rates, from 5 percent this year to 5.1 percent in 2013 to 5.3 percent in 2014; and a decrease in rental growth rates, with rents expected to grow by 5 percent this year, and then moderate to a growth rate of 4.0 percent for 2013 and 3.8 percent by 2014. This may be indicative of supply catching up with demand.
  • Office – The improved employment outlook is reflected in predictions for the office sector. Vacancy rates are expected to keep declining, reaching 15.4 percent in 2012, 14.4 percent in 2013, and 12.3 percent by the end of 2014. Office rental rates are expected to rise steadily, increasing 3.0 percent in 2012, 3.7 percent in 2013, and 4.3 percent in 2014.
  • Retail – The strengthening economy is expected to boost the retail sector. Following years of rising vacancies, vacancy rates are expected to tighten to 13.0% by the end of 2012, 12.5% by 2013, and 12.0% by 2014. Retail rental rates are projected to rise by a slight 0.8% in 2012, and then increase more substantially in 2013 by 2 percent, and by 2.8 percent in 2014.
  • Industrial/warehouse — Vacancy rates are expected to continue declining to 12.8 percent by the end of 2012, 12.1 percent in 2013, and 11.5 percent by the end of 2014. Warehouse rental rates are expected to show growing strength, with an increase of 1.9 percent anticipated for 2012, 3.0 percent in 2013, and 3.6 percent in 2014.

For the housing industry, the survey results suggest that 2012 could mark the beginning of a turnaround – albeit a slow one. Single-family housing starts, which have been near record lows over the past three years, are projected to reach 500,000 in 2012, 660,000 in 2013, and 800,000 in 2014. The national average home price is expected to stop declining this year, and then rise by 2 percent in 2013 and by 3.5 percent in 2014. The overhang of foreclosed properties in markets hit hardest by the housing collapse will continue to affect the housing recovery in those markets. However, in general, improved job prospects and strengthening consumer confidence will likely bring buyers back to the housing market.

The next ULI Real Estate Consensus Forecast is scheduled for release in September 2012.

To download a copy of the ULI Real Estate Consensus Forecast webinar slides, CLICK HERE.

NOTE TO REPORTERS AND EDITORS: The survey results were discussed today during a ULI webinar featuring three ULI leaders who participated in the survey: Peter Linneman, Ph.D, principal, Linneman Associates and chief executive officer, American Land Fund, Philadelphia; David Lynn, Ph.D, managing director, Clarion Partners, New York City; and Kenneth Rosen, Ph.D., chairman, Rosen Consulting Group, Berkeley, Calif. To request an interview with the webinar participants, contact Robert Krueger, ULI communications manager, at 202-624-7051; ">. The webinar will be archived at

About the Urban Land Institute
The Urban Land Institute ( is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in sustaining and creating thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use and development disciplines.

About the ULI Center for Capital Markets and Real Estate
The ULI Center for Capital Markets and Real Estate ( focuses on real estate finance, real estate industry and investment trends, and the relationship between the capital markets and real estate. The Center is engaged in a variety of projects including the annual Emerging Trends in Real Estate® reports, the monthly ULI Real Estate Business Barometer, the annual ULI Real Estate Capital Markets Conference, and numerous other programs.

Trish Riggs, 202-624-7086;
Robert Krueger, 202-624-7051;