It is a new year in commercial real estate and investors are all wondering the same two things: what is the outlook for this year and what types of commercial real estate listings are the safest bet heading into the future?
Based on the industry research being published now, commercial realtors suggest that all indicators point to 2018 being a good investment year; however, a change could be on the horizon for 2019.
Continued Growth into 2018
According to Colliers International, commercial real estate investment saw its peak in 2017, with fast and steady growth in the current industry cycle. Experts now point to a slowing of the volume of deals in commercial real estate listings for the past six months or more. Yet they also are quick to stress this does not mean there is no growth happening at all.
The forecast for 2018 is continued growth but at a slower pace as the cycle begins its predicted downward swing. Commercial realtors agree that 2018 will still be a good year for wise investors who make early and good decisions.
Top Sectors Currently Seeing the Most Growth
Making the most of 2018 demands that you pay attention to recent shifts in commercial real estate sectors. Based on current trends, as an investor you should consider these findings to weigh against your 2018 investment decisions:
- Retail - The retail sector continues to suffer, with many major retailers announcing closures in the first weeks of 2018. At the same time, there were actually more store openings than closures. Retail spaces are being skillfully repurposed and evolving into viable properties again. Some locations are seeing a rise in profitable retail while others are seeing a decline.
- Multi-Family - Another sector that is also cooling down is multi-family, which commercial realtors find is being affected by two main issues: stagnant wages and a construction boom that has flooded the market with more housing. Wage growth will determine a great deal in terms of what happens in this sector.
- Office - Demand for office space commercial real estate listings is not as feverish as it has been in the last few years; however, the office sector is continuing to perform well. Urban and suburban markets are balancing out and the office sector has continued to add jobs every month, although at a slightly slower rate than the previous year. Overall, if you are interested in investing in office space, it can still be highly lucrative in 2018.
- Industrial - Currently, demand for industrial space is still climbing as well, making it one of the best sectors heading into 2018. Yet experts warn that you should expect an eventual slowing similar to multi-family units once the market is saturated with properties.
Potential Change On the Horizon for 2019
The biggest factor that many experts have begun to stress is that although the beginning of 2018 is still experiencing growth in commercial real estate, this is likely to change by the end of the year. Based on current financial conditions, commercial realtors expect the possibility of a financial stalemate between buyers and sellers.
With landlords and sellers demanding higher rents because of the improving economy as well as buyers and renters unwilling to pay more due to rising interest rates, the entire commercial real estate listings industry could see a considerable downturn by the end of the year. In the meantime, 2018 is still sizing up to be a good investment market in most sectors if this is the investment opportunity you are seeking!