2020 Could Be a Banner Year for Commercial Real Estate
The US economy has been experiencing a lengthy expansion. There are some indications that in 2020, this growth may slow down due to weak manufacturing, and uncertainty about the outcomes of the upcoming Presidential election and current trade negotiations, as well as global health issues. The experts, however, believe that while growth may slow, it won’t stop, and there won’t be a recession.
According to researchers at CBRE, a commercial real estate servicer and investment firm, low interest rates, strong consumer spending, low inflation, and the positive effects of the Fed cutting rates in 2019 should keep the economy in general expanding. Additionally, increased capital flow into the real estate sector should provide for a flourishing commercial real estate market in particular.
When you put all the information together and extrapolate, it looks like the commercial real estate sector could see between $478 billion and $502 billion in new investment. That’s on a par with 2018 and 2019, and it’s better than in any previous years. CBRE sees much of that money going to office space, retail data centers, industrial buildings, multifamily housing.
For a specific example of a commercial property market and how things are going there, let’s look at Portland, Maine.
Commercial Real Estate Trends in Portland
According to the 2020 Greater Portland Outlook, a report that takes a comprehensive look at the commercial real estate market in the Portland area, vacancy rates in downtown Portland have dropped, there’s been a decline in medical office space vacancy for six years straight, and there’s been considerable investment in commercial property outside Portland city limits.
To summarize, those offering commercial property and commercial real estate for sale in 2020 have good reason for optimism. To make the most of these opportunities, it can only help to have a deeper understanding of 2020’s commercial real estate trends, and this is the case whether you’re an owner, a seller, a buyer, or a renter. So let’s do a deeper dive into those.
Commercial Real Estate Trend #1: The Top Markets
There’ll be plenty of opportunities across the US, but research suggests these markets in particular will offer abundant chances for investment and development. The majority are mid-sized markets anticipating high population growth and net migration.
- Atlanta, Georgia
- Austin, Texas
- Boston, Massachusetts
- Charlotte, North Carolina
- Dallas/Ft. Worth, Texas
- Los Angeles, California
- Nashville, Tennessee
- Orlando, Florida
- Raleigh/Durham, North Carolina
- Seattle, Washington
- Tampa/St. Petersburg, Florida
Commercial Real Estate Trend #2: How Demographics Affect the Commercial Real Estate Market
Many younger people aspire to move from the city to a suburban environment, but they’re not always in search of single-family homes. They prefer multifamily commercial property that has fitness, office, transportation, and entertainment options close at hand. They want nearby restaurants, shops, and scenic places to walk. All of this suggests opportunities for commercial real estate investment in suburban areas.
Commercial Real Estate Trend #3: Safety and Security
Today’s tenants are looking for the latest in safety and security measures. This means they favor a commercial property with security systems, surveillance, good maintenance, and strong, detailed safety measures.
They’re also looking for strong cyber security as in today’s world, cyber attacks pose threats to businesses as potentially devastating as any physical problem. When you hear about cyber attacks, you undoubtedly think of data theft, but there can be other serious problems as well. A hacked thermostat, for example, can cause threats to people’s health and safety, while a hacked physical security system can allow intruders into a building.
One takeaway from all this is that a CRE company should be proactive, not reactive. You can assess after a problem has occurred and make improvements, but it’s vastly preferable to have the measures in place that keep the problem from occurring in the first place.
Commercial Real Estate Trend #4: Tech
Obviously, by reviewing safety and security measures, we’ve already touched on technology. Even beyond safety and security concerns, however, today’s tenants are looking for state-of-the-art technology including controls for temperature, lighting, and building access, sensors and beacons to monitor retail traffic, and other helpful conveniences provided by artificial intelligence.
The implication here is that individuals building new commercial real estate should provide the latest technology, and those hoping to sell or rent out older commercial property may want to invest a technology upgrade.
Commercial Real Estate Trend #5: Mixed-Use and Nontraditional Commercial Property
The real estate market has seen an influx of investors and tenants seeking commercial property compatible with new and emerging business models and thematic investments that embody strong macroeconomic trend. CRE companies offering such property are well positioned to connect with such clients.
Commercial Real Estate Trend #6: Tech and Your Operation
We’ve touched on the importance of cutting-edge technology to attract investors and tenants to a particular commercial property. It’s just as valuable, however for a CRE company to avail itself of all the technological resources available to it. That will help it stay competitive in 2020’s commercial real estate market.
For example, proptech can chart how a property will likely be owned, managed, occupied, and used not only today but throughout its life. This information can make the commercial property more attractive to investors and tenants.
As seasoned veterans retire, the commercial real estate market is currently experiencing a shortage of new, knowledgeable professionals. Smart digital assistants based on machine-learning algorithms, voice synthesis, and pattern recognition technologies can go a long way toward taking up the slack.
We at Happy Grasshopper hope this information has proved useful. If you’d like our help with state-of-the-art technology to maximize the effectiveness of your commercial real estate marketing, we invite you to give us a call.