A new U.S.-focused real estate forecast from the Urban Land Institute and Ernst & Young reflects renewed optimism for growth in real estate capital markets and commercial real estate fundamentals, and even stronger expectations for housing than those made just six months ago.

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The findings, based on a survey of 38 of the nation’s leading real estate economists and analysts, were released today in the semi-annual ULI/E&Y Real Estate Consensus Forecast, prepared by the ULI Center for Capital Markets and Real Estate. The survey, conducted between March 4 and March 25, 2013, is the third in a series of polls initiated to gauge sentiment among economists and analysts about the direction of the real estate industry.

Predictions for commercial real estate activity improved significantly from the last survey, conducted in September 2012. Transaction volume in 2013 is expected to rise to $310 billion from $290 billion in 2012, then rise to $340 billion in 2014 and $360 billion in 2015.  The issuance of commercial mortgage-backed securities (CMBS), a key source of financing for commercial real estate, is expected to jump by nearly 50 percent this year, rising to $70 billion from $48 billion in 2012. In 2014, CMBS issuance is expected to reach $80 billion; in 2015, $100 billion.  

Total returns for equity real estate investment trusts (REITs), as tracked by the National Association of Real Estate Investment Trusts, are expected to be 12 percent in 2013, then moderate to 10 percent for 2014 and 8.0 percent for 2015. While these reflect a sharp decline from the surging REIT returns of 28 percent in both 2009 and 2010, the forecast suggests that REIT returns are settling at a more sustainable level.

Total annual returns from institutional-quality direct real estate investments for the apartment, retail, industrial and office sectors combined are forecast to be 9.5 percent in 2013, 9.0 percent in 2014 and 8.0 percent in 2015, continuing a downward trend that started last year, but remaining in the range of long-term historical averages