2019 Commercial Real Estate Trends to Dominate

2019 Commercial Real Estate Trends to Dominate 

As the New Year approaches quickly, Bisnow spoke to several industry experts, researchers and economists to figure out what major trends we expect to see in the commercial real estate industry in 2019. Here are a few of the top trends that experts are forecasting for next year.

Industrial boom to continue: based on the demand from the e-commerce sector, industrial real estate will soar to new heights in 2019. Class-A big-bulk warehouses do get the most attention, but the demand is broad-based and may extend to the secondary and tertiary markets.

Interest rates on the rise: we already saw one rate increase this month, and the Federal Reserve is likely to continue their course of action in 2019 and gradually increase the interest rates to curb inflation and maintain a stable economy.

Brick-and-mortar stores are far from dead: the retail industry saw stabilization in 2018 and retailer experts are predicting that retailers will begin reinvesting in their physical footprint to create the perfect omnichannel shopping experience for their customers. Digitally native, or e-commerce only retailers will increase as well, opening physical stores to grow their businesses.

Industrywide to embrace proptech: from owners to operators, commercial real estate professionals can no longer ignore the impact that technology is having on the industry. More businesses are embracing the latest technology to streamline the work flow, more paperless transactions and a more transparent approach to sourcing deals, managing assets, analyzing data and get the deals closed.

Available and affordable workforce housing will still be a topic: the demand for available and affordable workforce housing will remain a topic in the multifamily sector in 2019. The cost of affordable land and development have made it increasingly difficult to build affordable housing. The ongoing job growth has had a huge impact on the workforce housing affordability in most major cities.

Hipsturbias and Urban-burbs the new home for Millennials: recent data and research has found that Millennials are turning to the suburbs to raise their families. More than 2.6 million Americans relocated from the city to the suburbs in the last two years, according to the U.S. Census Bureau. This shift has bolstered investor interest and confidence in the non-gateway markets. “Hipsturbias” or “urban-burbs” are the new buzz words to classify these markets, with an increase in walkability and access to public transit. Retail follows rooftops so retail development will be in demand for the new residents.

Industrial, Multifamily and retail assets will be the investor favorite: according to ULI’s 2019 Emerging Trends report, industrial real estate assets will be the favorite in 2019. Retail is expected to attract the interest of investors next year, particularly those properties ready for redevelopment and upgrades.

Secondary and tertiary markets will remain strong: commercial real estate investors who are looking for a risk-adjusted return, will continue to bypass gateway markets to bet on assets in burgeoning secondary markets.

New construction will continue to struggle with high costs and labor shortages: the increased cost of construction was the number one concern in the Emerging Trends in Real Estate 2019 survey conducted by ULI. A number of factors are contributing to rising costs, such as a decline in immigrant laborers, traffics, trade wars and even the superstorms that have led to massive rebuilding in certain markets.

Multistory warehouse development to accelerate: multistory warehouses are nothing new for countries like Asia and Europe, however the U.S. market is just now beginning the development of these types of facilities. This trend has already started in market like Seattle, San Francisco, New York, Miami and Chicago.

Grocery stores will expand their online services with tech: grocery stores have battled low profit margins due to an increase in declining food prices and new low-cost rivals like Aldi. Online delivery costs have kept online grocery services sidelined, however that trend will shift in 2019 with the advancement of technology, investments on the part of retailers and consumer demand.

Hotel occupancy to break records in the U.S.: according to a forecast from CBRE Hotels America Research, the hotel sector is expected to break records in the occupancy levels in 2019.

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