IRR Viewpoint 2019 – Real Estate Research Roundup

Managing Director
Commercial Real Estate Outlook 2019 - IRR Viewpoint 2019

IRR’s annual Viewpoint publication is perennial required reading, produced by one of the largest appraisal firms in the United States. Given their broad scope and extensive national reach, their insights are worth reviewing and keeping nearby as a handy reference.

For real estate analysts, they also provide their data in Excel format for easy use when creating models that rely on market data.

  • 2017 tax cut legislation caused the economy to surge in mid-2018, but Real GDP is expected to flatten to 2.6% in 2019
  • The housing market is softening, with new housing starts down 6% Year-over-Year and tightening of labor, lumber and land causing a ripple effect
  • There is an abundance of investment capital, but indices show greater risks emerging
  • Employment conditions are shifting, and gains may slow

Office Properties

  • Occupancy is reported at the highest level since the Great Recession, with rents rising up to 3% annually
  • Transactions were down 6.1% Year-over-Year
  • Top Markets (by transaction growth rate): Minneapolis, Nashville, Raleigh/Durham, Denver, Phoenix
  • Bottom Markets (by transaction growth rate): Memphis, Kansas City, Hartford, Salt Lake City, Cincinnati

Office Outlook for 2019

  • Stable cap rates
  • CBD Class-A properties will see rent growth of 2.1%
  • Values expected to increase 2% or less in 60% of markets

Multifamily Apartments

  • Capital flooding into apartments, with secondary and tertiary markets as prime targets
  • Year-over-Year aggregate investment up 8.6%
  • Top Markets (by transaction growth rate): Cleveland, Columbus, Memphis, East Bay, Houston
  • Bottom Markets (by transaction growth rate): Long Island, Kansas City, Broward County, San Diego, Boston

Multifamily Apartment Outlook for 2019

  • Market rents will increase an average of 2.25%
  • Many markets (including Portland and Los Angeles) will see 4% or higher value increases
  • 35% of markets will see cap rates rise up to 25 basis points

Retail Properties

  • Year-over-Year transaction volume down 17.5%
  • Top Markets (by transaction growth rate): San Jose, Baltimore, Manhattan, Los Angeles, San Diego
  • Bottom Markets (by transaction growth rate): Austin, San Francisco, Las Vegas, Kansas City, Memphis

Retail Outlook for 2019

  • Retail markets can expect a 1.95% rent increase, along with a 2.6% operating expense increase
  • 76.6% of retail markets and 78% of neighborhood retail markets call for an increase in asset values
  • Cap rates average 7.04% for neighborhood centers, 6.88% for community centers, and 6.80% for regional malls

Industrial Properties

  • Industrial transaction volume up 13.9% Year-over-Year
  • Top Markets (by transaction growth rate): Richmond/Norfolk, San Francisco, Austin, Columbus, Minneapolis
  • Bottom Markets (by transaction growth rate): Westchester, Washington DC Metro, Stamford, Birmingham, Raleigh/Durham

Industrial Outlook for 2019

  • Industrial properties fuel 70% of GDP by personal consumption expenditures
  • Look for value increases in 88% of industrial markets
  • 5% rent growth in Las Vegas, Northern New Jersey, Houston, and Cleveland

Other Property Types

  • Hospitality
  • Healthcare & senior housing
  • Auto dealerships
  • Marijuana real estate

Also includes extensive data on cap rates, discount rates, and reversion rates by property type and market

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