U.S. commercial real estate performed exceptionally well in 2015. Although economic growth was moderate, job creation, a more important driver of real estate, had its second best year since 1999 (after 2014). The resulting absorption, coupled with a low level of deliveries across most sectors and cities, lifted occupancy rates to their highest level in 14 years. Tight fundamentals, robust rental income growth, and low interest rates helped drive price gains of 10%, even as returns on financial assets generally languished.
At the beginning of 2016, fears of a hard landing in China and potential contagion to other economies, including the United States, triggered volatility in financial markets. Coming on the heels of December’s Federal Reserve interest rate hike, the first in nearly a decade, some investors might question whether the upswing in U.S. commercial real estate is on its last legs.
Source : Deutsche Asset & Wealth Management