Connecticut/Western Massachusetts 2016 mid-year SIOR market survey

Branford, CT The Connecticut/Western Massachusetts chapter of SIOR announced the results of its membership semi-annual survey. The survey measured commercial real estate market conditions for the period January through June within the region.

Member responses regarding market conditions during the first six months of 2016 were positive; 54% of the membership experienced improvement, 23% experienced no change and 23% experienced a decline in market conditions within Connecticut and Western Massachusetts.   Predictions for the remainder of 2016 indicate a subtle shift in sentiment from the January survey with a plurality of members indicating improvement (46%), 39% anticipating no change in market conditions and the remainder anticipating a decline (15%).

Predictions regarding lease rates for the remainder of 2016 suggest upward pressure on industrial lease rates and weakness for office lease rates. Results for industrial lease rates were no change (50%), an increase (40%) or a decrease (10%).  A majority of members predict office lease rates will remain unchanged (66%) while a number expect a further decline (25%) and only 9% expect an increase.  Expectations regarding the direction of market vacancy rates for the second half of 2016 are similar to the prior survey for the industrial sector, but less positive for the office sector.  Industrial vacancy rates are expected to decrease (55%) or remain unchanged (45%).  Office vacancy rates are expected to remain the same (45%) with a sizable number anticipating an increase (45%) and the remaining members expect a decrease (10%).

Predictions for sales prices for the reminder of the year suggest upward pressure on pricing for industrial properties with stable pricing for office and investment properties.  Survey responses for industrial properties predict an increase in pricing (60%) with the remainder indicating no change (40%).  Survey responses for office differ as the majority (80%) indicates prices have stabilized and the remainder anticipates a price decline (20%).  Investment cap rates also predict prices will remain unchanged (70%) or expect cap rates to increase (20%) which results in declining values for investment properties. The remainder anticipates a decrease in cap rates (10%).

The members do not anticipate significant new development for the remainder of 2016.  Expectations regarding growth by users for the balance of 2016 are no change (54%), and the remainder evenly divided between expansion (23%) and contraction (23%).  Comments by members point to a market that continues to show gradual improvement.  While activity has increased, market conditions continue to be soft and demand is often sporadic.