The volume of U.S. commercial property transactions is forecast to reach $800 billion in 2022 and decrease to $725 billion in 2023 and $750 billion in 2024, according to Urban Land Institute's recent survey of real estate economists and analysts.
The projected levels are slightly lower than the record high transaction volume of $846 billion in 2021 but still above pre-pandemic highs.
Real estate prices are expected to moderate from 2022 through 2024 after strong growth in 2021. The Real Capital Analytics Commercial Property Price Index rose 19.5% in 2021 and is projected to hold steady at 10% in 2022. The price index is expected to drop to 6.0% in 2023 and 5.9% in 2024, the survey found.
Institutional-quality direct real estate investments posted strong total returns in 2021. The National Council of Real Estate Investment Fiduciaries Property Index reached 17.7%, and survey respondents predict the levels will moderate to 10.0% in 2022, 8.0% in 2023 and 7.0% in 2024.
In terms of rent, industrial and apartment properties are forecast to attain the strongest growth with annual average increases of 5.5% and 5.3%, respectively, from 2022 to 2024. Retail and office rents are projected to rise at an annual average of 2.0% and 1.4%, respectively.
Continuing the yearly growth levels in the past 10 years, housing starts are predicted to grow to 1.20 million in 2022 and 1.25 million in 2023, before declining to 1.1 million in 2024.
Survey respondents expect minimal changes in vacancy and availability rates across property types through 2024.
Availability rates are expected to remain low and essentially plateau for industrial properties. Vacancy rates are likely to tick up for apartments and hold steady for retail assets, while office vacancies are expected to remain elevated, according to the report.