Hot Trends in Commercial Real Estate
The commercial real estate market has had its up and downs in the 21st century, and the current macroeconomic environment is continuing its path to improvement. CRE recovery remains strong as an improved economy helps to bolster the market.
As is the case in many industries, technology is leading the way. The expansion in the use of technology has led to a wide variety of new business tools as well as changes that ultimately affect the commercial real estate industry as a whole. Real estate crowdfunding and e-commerce are just two prime examples of how technology has provided some disruption to the commercial real estate industry. Additional technology innovations have come from adopting new technology to run businesses seamlessly as well as interacting with tenants. Various initiatives have taken place in order to assist the commercial real estate industry in becoming more sustainable.
Multifamily properties have picked up steam gradually and are now beginning to outpace office transactions in some markets. The overall demand for apartments has been on an increased level. This is primarily due to Millennials opting to rent instead of buy, but additional prospective first-time homebuyers are also waiting out the market for a variety of reasons, not the least of which are the job market and low credit scores. Furthermore, a higher number of Americans are desiring to live an urban lifestyle, thus more demand for multifamily properties to rent.
The massive success of e-commerce has led to a reduced retail market and thus less demand on commercial property owners to rent retail space. However, grocery-anchored strip malls are flourishing in many parts of the country. High end and big name department stores are thriving with the better economy. Malls have also continued to be a popular destination shopping venue, with the average vacancy rate remaining low. Restaurant and retail construction is on the rise as consumers are spending more. Commercial retailers are looking to reinvent themselves and what once was a new location with the same design and blueprint has been transformed into a rejuvenated store front.
Industrial real estate has seen a partial uptick due in part to the e-commerce business, new construction is heating up in this sector and many investors have realized that it ranks high for investment as well. The development and investment for hotels and resorts have remained strong as the hospitality sector holds high liquidity rates.
Office space has seen a transitional period over the past few years. Many companies are looking for less wasted office space and also offer some employees the ability to telecommute which in turn leads to less of a need for space. While the space compression trend has worked, offices still need a business front and a cohesive office environment in order to attract customers and employees alike. Among the top factors that are considered by office space tenants are office space design and flexibility.
A continued improvement in the commercial real estate market is expected with forecasters predicting tighter vacancy rates and rent increases. Additionally, we will see a rise in the commercial construction market. Overall the commercial sectors are seeing improvement as investor interest has remained strong.