The Connecticut/ Western Massachusetts chapter of SIOR announced the results of its semi-annual membership survey of commercial real estate market conditions. The survey is based on market activity for the period July through December 2015 within the region.
SIOR member responses regarding market conditions during the last six months of 2015 indicated a continuation of the positive trend established earlier in the year. Members noting improving market conditions increased to 61% with 35% experiencing no change and 4% experiencing a decline in market conditions within Connecticut and western Massachusetts. Predictions for 2016 are split between neutral or optimistic with 48% anticipating no change in market conditions and 43% expecting improvement and the reminder expecting a decline (9%).
Predictions regarding lease rates for 2016 largely indicate status quo. No decline is projected for industrial lease rates as members either expect no change (71%) or an increase (29%). Office lease rates are overwhelmingly expected to remain unchanged (84%) and only 11% expect an increase while a small number expect a further decline (5%). Expectations regarding the direction of market vacancy rates for the first half of 2016 differ somewhat by market sector. The industrial sector has the more positive outlook as vacancy rates are expected to decrease (44.5%) or remain unchanged (44.5%) with 11% expecting an increase in vacancy rates. Predictions for office vacancy rates indicate a majority does not foresee a change (53%) and the remainder anticipates an increase (31%) or a decrease (16%). This is a shift in sentiment from the prior survey. A greater number of members previously anticipated a decrease in office vacancy rates.
Predictions for sales prices for 2016 generally point to stable pricing. However, results also suggest uncertainty regarding future market direction. Survey responses for industrial properties predict stable pricing (61%) with a group anticipating upward pressure on pricing (39%) and no responses expecting a decline. Survey responses for office differ slightly as a larger majority (70%) indicate prices have stabilized and a smaller component anticipate further price declines (20%) and a small group anticipate a price increase (10%). Results for investment cap rates include the majority anticipating they will remain unchanged (59%) or expect cap rates to increase (29%) which results in declining values for investment properties and the remainder anticipating a decrease in cap rates (12%).
The members do not anticipate significant new development in 2016. Expectations regarding growth by users indicate no change (66%) and the remainder divided between expansion (30%) and contraction (4%). Comments by members indicate an improving market but note difficulties such as softness in demand and tightening inventory in some sectors. Concerns regarding the overall business environment including growth, taxes and regulations are ever present and temper expectations for the future.
The Connecticut/Western Massachusetts Chapter is one of forty-six chapters of the prestigious international organization, the Society of Industrial and Office Realtors. Commercial real estate professionals must meet rigorous requirements to earn the SIOR designation. SIOR, based in Washington, DC and founded in 1941, has more than 3,200 members in 593 markets located in 22 countries on 6 continents. SIORs are top producers who are required to complete an educational recertification program every three years. This assures those who need the services of a commercial real estate agent that the SIOR has achieved continued excellence.
Please visit the Chapter’s website (www.siorct.com) to find additional information on the Connecticut/Western Massachusetts Chapter, Chapter members, and upcoming events. Should you have questions or interest in the requirements and benefits of becoming a SIOR and joining the Connecticut/Western Massachusetts Chapter, please contact Stephen Press, SIOR at 203.288.1900 or John Reed, SIOR at 860.987.4788.