The commercial real estate market in the U.S. is enormous. Between 2002 and 2017, this market added value to the tune of $76.58 billion USD.
Even though this market is so large, the vacancy rate is increasing.
The economy is expected to keep growing this year, but some changes need to be taken into account to get the commercial real estate industry to reflect those growth rates regarding occupancy.
It’s why we look at this market with conservative optimism.
Keep reading to find out the top commercial real estate trends you should keep an eye on this year.
Office Market Will Remain Flat
The dynamics of commercial real estate for offices are changing.
Smaller companies are starting to make up a greater percentage of the market. These businesses have lower budgets for rent and are opting for flexible work environments. This reality means they want smaller spaces as more people can work remotely.
Startups are also turning more towards co-working spaces. These spaces don’t require signing long-term leases with commercial real estate companies.
As these dynamics continue to evolve, we’ll notice a slowdown of growth in the office market.
The Economy Will Continue to Grow
The economy has expanded at a reasonable growth rate over the past year and it will continue to do so well into 2018.
Still, professionals are optimistically wary. Just because the economy is expanding doesn’t mean the commercial real estate market will expand at the same rate.
Industrial Spaces Will Increase
There are a number of economic and political factors at work that are increasing the need for more industrial commercial real estate.
Companies, such as Amazon, continue to expand their offerings and shorten their delivery time. These promises will require more regional warehouses.
To compete with Amazon, other big-box retailers, like Walmart, are also expanding their delivery services. They’ll need more regional warehouse space as well.
Shift from Corporate to Leisure Hotels
Over the past couple of years, there has been a shift in leisure travel in the U.S. Almost four out of five domestic trips were taken for leisure purposes.
With those shifts in the purpose of travel comes a need for more leisure-focused hotels rather than the cookie cutter business hotel model. Hotel management companies will need to retool their hotels to appeal to that leisure market. They could also build hotels to meet the needs of leisure travelers.
Retail Closures Will Slow
In 2016 and 2017, major retailers, like Macy’s and JC Penney, closed hundreds of stores across the country. While those retailers will likely need to continue closing stores due to the struggling retail industry, they’ll likely do so at a slower rate.
Commercial real estate managers are also trying to convert abandoned or nearly-closed mall properties into experiential locations to generate revenue.
While there are many more commercial real estate trends to keep an eye on, we feel these are the most important. Where you focus will depend on which sector of the market you’re involved in.
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