While only minimal improvement is expected in the local real estate market in the coming year, Boston’s commercial properties are still expected to outperform most of the country in 2012, according to a forecast from Jones Lang LaSalle (JLL).
JLL said the region will continue to benefit from a proliferation of high tech, education and health care firms and institutions, and said it expects venture capital firms and a strong labor pool will continue to drive leasing activity in the region.
"While displaying resilience in this cycle, Boston would not be spared in the face of prolonged global uncertainty and wavering global demand," said Lori Mabardi, JLL research manager. "Exports are a meaningful part of Boston’s economic story. That being said, the metro is expected to continue to benefit from exposure to education, healthcare and high tech industries. From a real estate standpoint, the growth in these areas has translated into very favorable real estate fundamentals in top, key submarkets such as Cambridge. Available space in close proximity to educational institutions, venture capital firms and a strong labor pool, for example, continues to command increasing rents. This trend is expected to persist through 2012."
Nationally, the level of liquidity and investment transaction volume has improved over the last two years, but annual growth rates are slowing, according to the real estate services company. Total transaction volume, including office, industrial, retail and multifamily, will continue trending upward throughout 2012, but at a slower rate than the last two years.
"Total investment transaction volume in office, industrial, retail and multifamily will increase by a projected 15 percent to 20 percent over the 2011 forecast total of more than $160 billion, which in itself will represent an approximately 44 percent increase over total volumes in 2010," said Ben Breslau, Jones Lang LaSalle’s Americas Research Managing Director.
Breslau said he believes investor sentiment will continue driving markets in 2012, given the uncertainty and caution that remains in the system. The market could see short-run fluctuations as investors alternate between seeking out more risk at times and briefly pulling back at other times.
Additionally, the U.S. apartment market continued its strong performance in 2011, and at the outset of 2012 the sector is poised to outperform other property types. The strength of the market is fueled by low levels of new deliveries, a continued shift from homeownership to renting, positive demographic trends and slow but steady employment growth, according to JLL.
