NEW YORK, NY--(Marketwire - Feb 6, 2013) - While the housing market saw strong recovery in 2012, the U.S. commercial real estate showed signs of inconsistent growth last year. However, the outlook for commercial real estate market is optimistic for 2013. This is a good sign for commercial real estate companies such as CBRE Group and Brookfield Office Properties. In a report in November last year, the National Association of Realtors (NAR) said that most of the major commercial real estate sectors in the U.S. show gradually improving fundamentals.
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In November, Lawrence Yun, Chief Economist at NAR, said that the key to increasing demand in the commercial real estate sectors is job creation. Recent data, including Friday's non-farm payrolls that were broadly in-line with expectations, suggest that the labor market is continuing to recover, albeit at a slow pace. Yun also said that in November that the U.S. economy is expected to grow 2.5% in 2013, and with modest job creation, assuming there is no fiscal cliff, the demand for commercial space will gradually rise.
The fiscal cliff, one of Yun's concerns, was averted at the start of this year after lawmakers reached a last-minute deal. This has given a boost to the commercial real estate market. In a recent report, Jones Lang LaSalle echoed NAR's sentiment. Jones Lang LaSalle said in the report that while challenges remain with the domestic deficit and debt situation and Europe's sovereign debt issues, the baseline for a recovery in the private sector across the U.S. remains, and is likely to pick up speed through the year and into 2014.
Last month, CBRE reported that despite sluggish economic growth, the U.S. commercial real estate market remained on a recovery path in the fourth quarter of 2012. According to CBRE's latest analysis, vacancy fell 10 basis points to reach 15.4% in the fourth quarter of 2012. Office vacancy rate dropped by 60 basis points in all of 2011, CBRE said in its report last month. The data further highlights the improving fundamentals and continuing recovery of the commercial real estate market.
Jon Southard, Managing Director of CBRE's Econometrics Advisors Group, said that the broken record of slow but positive progress toward a real estate recovery continues to repeat. Southard noted that private sector hiring and confidence should accelerate if Washington DC is able to forge a long-term budget deal and concerns in Europe remain at bay, paving the way for stronger office-using job growth and absorption.
Brookfield Office Properties has reported its fourth quarter financial results. The company reported funds from operations of $650 million, or $1.14 per diluted common share for the quarter ended December 31, 2012, compared to $640 million, or $1.14 per diluted common share reported for the same period in the previous year.
Dennis Friedrich, CEO of Brookfield Office, said that 2012 was another successful year for the company, characterized by solid leasing achievements, expansion into new target markets, and the advancement of several major development projects.
Investors are now waiting for CBRE's fourth quarter results, which has not been released by the time this article was completed.
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Michael Thomas Smith