Predictions for Real Estate in 2011

This is the fifth recession and subsequent recovery I have worked through.  I have learned that business cycles have been and will always be a part of our industry.  It’s just a question of timing.  

Now that 2011 is underway, here are my predictions for the real estate market this year:

  1. Office rents:  Tower rents will break the $75 per square foot barrier. Suburban rents along 128 will hit $35.
  2. New Construction: Multi-family construction will continue to be a sure thing in Boston and the suburbs.  The only speculative commercial building construction starts in the state will be in Cambridge.
  3. Filenes in Downtown Crossing: Will be approved this year with a construction start in 2012. Besides the obvious garage, there will be at least two floors of retail, an apartment tower, and a phase two office tower.
  4. Financing: Plentiful for the well capitalized owner from multiple sources including CMBS.  Interest rates: steady in the 5-6 percent range.
  5. Cambridge market: Employment and space growth in the Life Sciences (biotech and pharma) will lead to new developments.
  6. Hospitals/Colleges: Improving endowments and lower construction costs will put back on track pre-recession expansion plans (but not Harvard’s massive Allston development.)  
  7. Multi-family construction: Twelve developments (each with over 100 units) will start this year.
  8. Foreclosures: Single family foreclosures will increase and some commercial loans for industrial and suburban office/R&D will be placed on the block.
  9. Investment sales: The number and gross sales volume will be the highest since 2007.
  10. Unemployment rate for the Commonwealth: It will be up slightly (less than 1 percentage point) by the end of the year.

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