The commercial real estate market is constantly in motion, fluctuating with changes in the economy, employment, banking, and many other elements. Heading into 2018, commercial realtors and industry experts anticipate yet another good year; however, they also point to some influencing trends to watch.
If you are buying commercial real estate, pay attention to the current market trends and the type of movement expected in the next year.
Slow Shifts in the Housing Market
Although the market is going through some changes, housing continues to be a strong choice for commercial real estate. Multi-family demand is still strong, especially in markets seeing increasing employment rates and growing demand for office space. Yet this demand is beginning to slow down.
The demand for affordable housing overall, including multi-family and single family units, continues to grow. Commercial realtors project that 2018 will be a strong year for multi-family housing; however, the need for lower-cost, single-family housing in key markets will grow as well.
Office Space Growth Continues
Job growth has remained steady throughout 2017 and with it, the demand for office space in key urban markets. There is a notable demand for office space near entertainment and shopping venues, with a trend toward smaller, greener, and flexible spaces that can be used in a variety of ways.
Based on current trends, it is expected there will be more new office construction and investors buying commercial real estate with the intent to repurpose it for office space and other mixed use.
Physical Retail Space Is Evolving
As online retail continues to grow, brick and mortar retail space is feeling some of this effect. While there have been closures in 2017, analysts find that overall consumer spending is growing. To accommodate the changing retail landscape, many retailers are using smaller physical locations alongside their online websites.
Some retail markets have been more affected than others based on retail locations, consumer demographics and demand, and more. Repurposing certain retail commercial real estate buildings is also becoming common. Buying retail commercial real estate should not necessarily be avoided; however, it does require careful research before making any type of purchase.
While physical locations evolve to stay in demand and cohabitate with online retail, lenders are becoming more cautious.
Demand for Industrial Space Booming
Commercial realtors are also finding that the growth in online sales is creating an increase demand for industrial and warehouse space. The growth of immediate delivery and shopping convenience has increased the number of warehouse distribution centers in and around bigger cities. Based on such ecommerce growth, this number is expected to climb considerably in 2018.
Overall, the outlook seems quite positive for most sectors of commercial real estate going into the new year. Even retail can be a good investment for buying commercial real estate provided you find the right market and cater to the right businesses. No matter what investing interests you, it is imperative to work with experienced commercial realtors who know the market well and can help you make the most successful investment decisions!