Danbury, CT The Connecticut/Western Massachusetts chapter of SIOR has compiled 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 2016 within the region.

SIOR survey results point to a continuation of the positive trend established earlier in 2016. Responses have trended away from negative to either stable or improvement. In general, it indicates a market that continues to improve although the pace of improvement in the office sector is lagging behind the industrial sector.  Members noting improving market conditions were in the majority (59%) although this is a slight decrease from the prior survey. Members experiencing a stable market increased to 37% and those experiencing a decline decreased to 4%. Predictions for 2017 are more positive with 63% expecting improvement, 33% anticipating no change and the reminder expecting a decline (4%).

Predictions regarding lease rates for 2017 are positive for industrial but less so for office.  No decline is projected for industrial lease rates and members are evenly split between no change (50%) or an increase (50%). Office lease rates are largely expected to remain unchanged (52%) and the remainder is evenly divided between an increase (24%) and a further decline (24%). Expectations regarding the direction of market vacancy rates for the first half of 2016 differ by market sector. The industrial sector has the more positive outlook as vacancy rates are expected to decrease (82%) or remain unchanged (14%) with only 4% expecting an increase in vacancy rates. Predictions for office vacancy rates remain stable but negative with 48% expecting an increase in vacancy rates or rates to remain unchanged (28%) and the remainder anticipates a decrease (24%).

Predictions for sales prices for 2017 differ by sector. Survey responses for industrial properties predict upward pressure on pricing (54%) with a group anticipating stable pricing (41%) and 4% expecting a decline. Survey responses for office are less positive as (50%) indicate prices have stabilized and a smaller component anticipate further price declines (32%) and a small group anticipate a price increase (18%).  Results for investment cap rates presumably reflect potential interest rate hikes with a majority anticipating no changes (48%) or expect cap rates to increase (38%) which results in declining values for investment properties and the remainder anticipating a decrease in cap rates (14%).

Although the majority of members do not anticipate new development (63%) in 2017, a number of members expect an increase (30%) in development and a minority (7%) expect a decline. 

Expectations regarding growth by users indicate no change (48%) and the remainder divided between expansion (41%) and contraction (11%). Comments by members reflect positive sentiment about the market and the national economy ahead but note challenges specific to the region’s economy and business climate. A separate set of challenges will be finding product for users/investors at pricing they can accept/afford in the face of declining inventory and an extended period of non-development.