Industrial and office properties forecast to outperform

Zoe Loza

The United States’ commercial real estate market continues to improve in all areas, according a recent report published by Deutsche Asset & Wealth Management. With economic growth improving, real estate returns are set to outperform most other asset classes.

The strongest property sectors in the next five years are expected to be industrial and office as they are set to benefit from strong income growth. Though the retail sector will continue to have steady net operating income (NOI) growth, the gains will be lower than those of office and industrial. The apartment sector will be a solid performer, but is expected to weaken in the near term as more new supply comes online and slows rent growth.

The industrial market has seen consistent leasing demand since 2012 — indicating a growth cycle — and will build upon its strong performance in 2014. The office sector is in its strongest position since the recession, and conditions should continue to improve as employment growth increases.

Apartments are by no means lagging behind the other sectors, as vacancy rates are low and rents are high. The forecast top performing multifamily markets in 2015 are located primarily along the West Coast and in South Florida.