The commercial real estate market is expected to continue its momentum in 2020. Some are predicting it will be the strongest on record in the past several years and could see billions of dollars in growth. This optimistic outlook is in spite of slower economic growth and global uncertainty in general. Even the few bumps that are expected won’t be enough to cause any major slow-down in commercial real estate.
What 10 trends can investors expect in the upcoming year?
1. Interest Rates are expected to Remain Low
The Fed is not expected to drop rates any further unless something drastic happens, rates are expected to remain as low as they are. The dollar also continues to be strong. This means there is plenty of opportunity to be able to invest and expand. Low rates are expected to continue beyond this year as well.
2. Commercial Real Estate Will Not Reflect the Overall Economy
The upcoming year is not expected to bring a full-blown recession, but things are slowing down, due in part to how trade is being handled. The job market and manufacturing growth could be a concern, but this will not bleed into the commercial real estate market.
3. The Favorable Tenant Market Will Continue
The tenant market is expected to continue to thrive, especially for those in retail and office space. There is vacancy in most markets and landlords remain motivated to fill space. Tenants will be able to negotiate aggressively.
4. Tenants are searching for More Traditional Floor Plans
Open offices and floor plans are no longer in demand like they used to be. More people are looking toward traditional build outs and they require more square footage per person in their space.
5. Second Tier Markets Have Become First Tier Markets
More and more companies are looking to set up offices in cities that have a lower cost of living. They have also recognized there is plenty of talent in these areas that can draw on. So-called “Second Tier Cities” are experiencing massive growth and plenty of places that would’ve been ignored in the past are now considered hot spots.
6. Co-working Spaces Will Continue to Grow, But Do Not Expect a Turn Toward Working from Home to Hurt the Market
Companies still want traditional offices spaces and even though things are changing a bit, co-working and telecommuting are not expected to have a significant impact on the commercial real estate market. Co-working spaces are not going anywhere, but investors do not need to make any decisions about investments based on these setups.
7. The Industrial Market Will Flourish
The industrial market slowed a bit in 2019, but it was still a good year big picture-wise. It was just hard to top 2018 in terms of growth. 2020 is expected to be similar and growth in the e-commerce sector could play a huge role. This upcoming year will offer plenty of opportunities to benefit from investing in and owning industrial and freight forwarding space.
8. New Developments Will (Finally) Break Ground
The Opportunity Zones that hit the industry in the last three years will finally see construction start. New rules and funding were set up the last two years and now new downtowns and adjacent neighborhoods will offer plenty of opportunity for investors. These new properties in new areas will be great places to serve as new homes for a business.
9. So-Called “Experiential” Retail Space Will Have a Major Impact
There are plenty of signs that “experiential” retail will continue to see big growth in 2020. The latest trend in retail space is to offer an entire experience – shopping, dining, entertainment, and more. Instead of people going to the mall to shop, they are going to shop, dine, see a movie, enjoy indoor golf or skydiving, and in some cases, live in the same area. This trend could also expand to office space design. People are ready for something different when they shop and when they work.
10. Election Uncertainty
This is a presidential election year, which always has an impact on all parts of the economy. But the expected pre-election slowdown could provide an opportunity for you to capitalize. While other people wait due to their uncertainty, anyone who takes action will benefit.