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Survey predicts 3 more years of commercial real estate growth

California residents may be interested in a new forecast issued by the Urban Land Institute for Capital Markets and Real Estate. The study, which was released April 8, indicates that the commercial real estate industry is likely to enjoy sustainable growth nationwide for at least three more years. The prediction, made by industry economists, is based on a mix of strong property and economic market fundamentals.

According to the survey of 46 economists, commercial real estate transaction volume is expected to rise to $470 billion in 2015, which is an 11 percent increase from last year's $424 billion. Volume is predicted to increase by another 6 percent in 2016 and 2017. The economists said the increases will be driven by improving occupancy and vacancy rates, which will push better than average rent growth in all commercial real estate sectors.

The survey also predicted that institutional-quality direct real estate investment returns will average 9.9 percent between 2015 and 2017. Meanwhile, 10-year U.S. Treasury notes are expected to average a 3 percent return during that time. In 2015, issuance of commercial mortgage-backed securities is expected to reach $115 billion. It is predicted to reach $133 billion in 2016 and $150 billion in 2017.

The economists surveyed believe that real estate lending will remain competitive, with commercial real estate prices rising an average of 7.6 percent annually. The long-term average rise is expected to be 5.3 percent.

Growth in the real estate market may also lead to growth in real estate litigation needs. Businesses and entrepreneurs looking to engage in commercial real estate transactions may benefit by seeking the advice of an attorney. Legal counsel could assist with issues such as contract negotiation, sales, purchases and management agreements.

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