2015 Commercial Real Estate Industry Outlook

As we look forward to 2015, the macroeconomic environment is expected to continue to improve. The single-family housing sector—pricing and sales—continues to strengthen, albeit at a slow and inconsistent pace. These positive macroeconomic parameters could potentially provide a further boost to the strengthening CRE recovery.

In this Outlook, we highlight 10 areas that the CRE industry will need to give their full attention, ranging from globalization to sustainability. This Outlook, produced by the Deloitte Center for Financial Services, provides an analysis of industry priorities and anticipated trends based on interviews with our leading CRE practitioners to predict what's coming in 2015.

See below for a high-level overview of the anticipated trends and key priorities for real estate players. For the full view into the expected CRE trends, download the report.

This Outlook is part of Deloitte’s Financial Services Industry Outlooks series, which provides insights and trends for banking, insurance, investment management, and commercial real estate.

Interview with Bob O’Brien

What are opportunities and challenges for the real estate industry in 2015? Read this interview with Bob O’Brien, Deloitte’s Global and US Real Estate Industry Leader for insights on industry growth, potential challenges and pitfalls, and the next big thing. 

Macroeconomic fundamentals

Positive economic growth supporting the CRE industry

• Fundamentals, transactions, and lending continue to strengthen, although risks related to interest rate hikes and regulatory uncertainty will potentially impact growth

Globalization

US gaining traction as the preferred investment destination

• The rising foreign investor interest can provide an additional funding source, especially for development
• Companies looking to access foreign capital should understand the investment pattern and objectives to build long-term and mutually beneficial partnerships

Investments

REITs and PERE funds demonstrate strong performance

• REITs will continue to benefit from the favorable transaction pricing and financing environment
• PERE fund managers will likely search for value and attractive opportunities across wider markets and/or property types

Financing

Innovative funding options increase financing availability

• Players can refinance their existing mortgages at favorable terms and also have improved access to financing
• Companies can leverage newer sources of funding such as green bonds

Transaction activity

A sweet spot driven by a broad-based recovery in deals and pricing

• Companies can take advantage of the robust transaction and pricing environment
• Companies can begin with a thorough due diligence of their existing portfolio, identify the non-accretive properties for disposal, and eventually plan new developments, redevelopments, and/or acquisitions

Property-specific fundamentals

Tenants’ sustainability focus and technology use redefines space demand and supply

• CRE players should change their demand-supply assessment and factor in the influence of technology and competition
• Increasingly collaborate with potential and existing tenants at the design stage to understand their technology needs and incorporate them as an integral part of the design and/or redesign

Sustainability

Adoption, measurement, and reporting is a business imperative

• Three critical factors to improve measurement and reporting of sustainability practices are awareness, analysis, and action
• CRE players should put processes in place that drive environmental performance

Technology & automation

Adoption integral to enhancing tenant engagement

• To maintain a competitive edge, companies need to be progressively aware of new technology
• Companies will need to develop a customized plan for individual as well as overall technology adoption as a “one-size-fits-all” approach is unlikely to work

Security & privacy

Appropriate measures important for successful technology adoption

• CRE companies can consider a step-by-step approach including developing a security and privacy framework, increasing employee awareness, and having a business continuity plan

Regulations

Continued uncertainty

• CRE companies need to prepare for the potential non-renewal of TRIA
• With respect to FIRPTA, companies can work with foreign investors to create tax-efficient deal structures