Construction starts are expected to trend lower this year following a 2016 that is shaping up to be both a post-recession peak and an inflection point for development across all major property types in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space.
The Associated Builders and Contractors (ABC) forecasts a slowdown of growth in the 2017 commercial and industrial construction industry segments of the U.S. and Philadelphia commercial real estate markets due to rising commodity prices and potential further interest rate increases this year.
This report on national and Philadelphia commercial properties was made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
The consumer-led recovery, however, still is expected to support modest construction spending and employment in relation to U.S. and Philadelphia commercial real estate properties. The economy continues to expand amid a weak global economy and — despite risks — nonresidential spending should expand 3.5 percent in 2017, said ABC Chief Economist Anirban Basu.
“For more than two years, the Federal Reserve has been able to focus heavily on stimulating economic growth and moving the nation toward full employment,” Basu said. “However, as commodity prices including energy prices firm up and labor costs march higher, the Fed will need to be more concerned about rising inflation expectations going forward.”
Both anecdotally and by CRE forecasts issued by The CoStar Group, 2016 appears to be the peak year for total construction activity involving national and Philadelphia commercial real estate listings, as well as an inflection point.
Despite being at levels that remain well below those of the previous cycles, construction in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – has slowed in recent quarters. However, both the warehouse/distribution and apartment sectors have out-performed, generating construction activity well above prior cyclical highs.
For example, condo projects among U.S. and Philadelphia commercial real estate listings shrunk to a paltry 3 percent of total multifamily construction by 2013, when just 4,300 units were completed, compared to 50,000 units, or 30 percent of all multifamily construction, completed in 2007. New condo construction remained hard to finance as of the third quarter of 2016.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) or Leor Hemo (leor.hemo@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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