Although it is only partway into 2017, commercial real estate is experiencing a number of strong trends that investors should notice. As the economy in the U.S. has continued to grow, particularly with regard to real estate, those looking for investing opportunities may find 2017 to be a beneficial year to take advantage of favorable market conditions.
Despite the current positives, some issues do exist that leave a number of uncertainties. So for lucrative commercial real estate investing, individuals should consider the ups and downs most likely to happen this year based on recent economic and world events.
Demand for Reinvented Commercial Properties
There has recently been an increased demand for repurposed commercial real estate. This is somewhat due to the availability of vacant properties of all types as well as a continued need for commercial space.
Industry changes have many retail stores moving out of their spaces, which are then being purchased and reinvented as office and industrial spaces or even multi-family housing. This trend is expected to continue throughout the year and is more financially attractive in many cases; however, the demand for these properties as multi-unit housing seems to have reached its peak in many urban areas.
Slowed Demand for New Construction
Coinciding with the steady increase of commercial real estate investment in repurposed properties, the demand for new construction has waned in the past year and continues that trend. Much of the new construction completed in 2016 was multi-family housing which as mentioned above, is slowing, although the demand for senior housing is slowly increasing.
Investments in repurposed buildings have added to the slowing interest in and funding of new construction. Since lenders are becoming more cautious that a recession might be upcoming, financing for new construction is becoming more challenging.
Global and Political Effects on U.S. Properties
Recent global uncertainties like Brexit and its effect on import and export tariffs are expected to impact everything from political issues to retail sales and industrial production. Many experts believe this will have a positive effect on the U.S. commercial real estate market and increase property value as this country is seen as a safer investment option than other locations. Foreign investment in U.S. properties could increase since U.S. real estate remains one of the most secure global markets.
Potential Interest Rate Fluctuation
Political environments and projected changes in the interest rate could also have an effect on the commercial real estate industry. With interest rates expected to increase over the next months, obtaining lending may be more challenging for some investors. Generally speaking, experts feel there will be enough creative financing options available for investing to continue being lucrative for most.
In addition, lower oil prices could positively affect many urban markets, although it will likely cause a negative effect in markets closely tied to the oil industry such as Houston Texas and the oil regions in North Dakota.
Overall, it seems that the commercial real estate investing market is remaining steadily strong into 2017. There are still a few potential factors that could have a negative impact. Those looking for the best opportunities in commercial real estate should consider such possibilities when determining their risks, then carefully research these trends in their local investment market!