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As 2013 begins, the U.S. economy and real estate markets would seem to be in a similar po-sition as they were a year ago: recovering slowing, facing stiff legacy headwinds from the re-cession, and still waiting for direction from Washington. But there is much to distinguish this new year from the dawn of 2012, much of it favorable: initial unemployment claims and job-lessness have started a stronger decline; housing prices have finally begun to increase across the nation while housing permits are also rising; and household and corporate balance sheets are in much better shape, setting the stage for greater spending and investment. Additionally, despite widespread fears, our political leaders managed to avert, or at least delay, the “fiscal cliff,” and prospects seem high that deals will soon be struck on other pressing fiscal issues. Expect the first half of 2013 to follow a similar growth trajectory as in 2012, but to accelerate during the second half of the year.
Property markets continue to edge further into recovery. Apartments are already back to peak rents in many key markets and vacancies are below their long-term averages. However, for industrial, office and retail properties, growth has been more elusive, with rents still well below prior peaks and vacancies significantly above historical averages. The coming year will be another period of modest improvement, followed by more robust growth in 2014.
Real estate investment remains attractive relative to other asset classes in the United States. Yield spreads to 10-year treasuries are historically high. Periods of high real estate spreads typically are followed by several years of outperformance. Meanwhile, new construction re-mains low in all but a few key markets, allowing property fundamentals to continue improving as demand recovers. Finally, debt markets are thawing with traditional lenders starting to loosen standards and more lenders providing debt. Solid returns and increased debt availabil-ity should facilitate greater transaction activity and begin to spread liquidity to more markets.
Source : RREEF Real Estate
