Commercial Forecast: Solid Growth, Shifts in Property Use

By | May 19, 2017

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Commercial Forecast: Solid Growth, Shifts in Property Use

Despite slight easing of demand across some sectors, positive fundamentals within the economy point to modest improvement in commercial real estate activity. yet sweeping modifications in technology in addition to consumer lifestyles likely will change the needs of commercial clients within the years ahead. 

Completions, net absorption, in addition to vacancy rates across most sectors will remain solid moving into 2017, George Ratiu, NAR’s director of quantitative in addition to commercial research, said during the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C. The retail sector, which is actually grappling with modifications in consumer spending patterns in addition to the growth of ecommerce, is actually facing some headwinds. Ratiu forecasts vacancies to improve via 12 percent in 2016 to 12.6 percent at the end of This particular year. 

Department stores in addition to additional big retailers are trying to adjust to changing consumer preferences. modest discount grocery retailers such as Aldi in addition to Lidl, which had little or no presence within the United States just a few years ago, are starting to make inroads as young urban households look for low-cost convenient stores. Restaurants in addition to bars are also doing well. 

Office properties are under some pressure as the economy shifts to a more mobile workforce requiring smaller, more flexible space—yet occupancy continues to hold up. Ratiu forecasts office vacancies to drop via 13 percent last year to 12.9 percent at the end of This particular year. 

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Industrial buildings, benefitting via rising trade in addition to ecommerce, are seeing strong absorption in addition to rent growth. Ratiu said the sector saw 257 million square feet of net absorption last year in addition to growth of 6.6 percent in cost per square foot. Vacancies are anticipated to improve via 9.4 percent last year to 9.1 percent at the end of This particular year. 

During the session, Lawrence Yun, chief economist at the National Association of REALTORS®, also pointed to growth in data centers, which is actually being fueled by companies such as Uber in addition to Amazon. These companies’ business versions require the storage of large amounts of data. 

Multifamily rental properties, which have seen strong gains in rental rates since the end of the last housing crisis, are anticipated to continue seeing low vacancy rates, via 6.3 percent last year to 6.2 percent at the end of This particular year. 

Ratiu said the performance of global economies within the year ahead will be critical to the future health of commercial real estate sectors. Capital via global investors dipped 20 percent within the first quarter of This particular year, yet some markets within the U.S.—including San Francisco, Dallas, in addition to Houston—continue to see strong inflows. 

For smaller commercial properties, which comprise the bulk of commercial REALTORS®’ business, lending standards are tightening as regulators talk about containing any froth within the market.

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Source : Commercial Forecast: Solid Growth, Shifts in Property Use

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