Whether you’re a commercial real estate agent working with a firm, or you’re
a commercial real estate investor, staying up-to-date with commercial property trends is key for adapting to new demands. With new business models and competition, the impact of technology, and changing tenant and investor expectations, it’s definitely a lot to keep up with. This is true, not only for the commercial real estate sector but all other sectors in the real estate investing industry. Because at the end of the day, everyone wants to be a part of a profitable real estate investment.
Related: US Housing Market Predictions: What’s to Come in 2019
With that being said, here’s the real estate market forecast for US commercial real estate 2019.
Commercial Real Estate Trends 2019
Commercial asset pricing is on the rise
According to Real Capital Analytics’ Commercial Property Price Indices, overall pricing in the US housing market has increased 6.5% year after year. Although every sector has experienced price increases, the commercial sector has hit record-high pricing levels. Apartments, industrial, and suburban office assets have the largest boosts, with prices rising 11.6%, 6.5%, and 6%, respectively. So in general, property prices are increasing at modest rates, with cap rates remaining stable.
Related: Investing in Commercial Property vs Residential Property for New Investors
Potential decrease in office construction
Demand for modern office environments is apparent with the rise of many new businesses, both in the form of traditional companies and new innovative start-ups. So far in 2018, this demand has been met with successful office construction. Almost 60% of the new office spaces introduced into the market was leased as soon as building was complete. In the US, an influx of 28.8 million square feet of newly constructed office space was seen in the first two quarters of 2018.
However, US housing market predictions for office construction in 2019 might not be as positive as they were this year. Experts predict developers will start pulling back for a number of reasons. Among these reasons are increasing construction costs, real estate cycle concerns, and zoning problems.
A projected 54.7 million square feet of new office construction in 2019 would mean a drop of over 18% from the 2018 figure (expected to be 68.4 million sq/ft).
Multifamily investing on the rise
One of the strongest commercial real estate market trends has been noticed in the multifamily sector. Multifamily real estate transactions throughout the current year led to an increase in sales volume of 8% to $70 billion year after year.
Industrial assets are also a star in commercial real estate investing. Industrial transactions were highest after multifamily, with about $40 billion worth of assets traded. This is more impressive when compared to how they performed last year- up 26%.
It’s also important to mention that although multifamily properties are number one, warehouses are showing the biggest gains.
Investor’s eyes are definitely on multifamily properties in the market. Now they’re the best selling assets of the major property sectors, but they haven’t always been on top. Ten years ago, the highest sales volume was seen in commercial office properties. That just goes to show how important it is to keep up with commercial real estate trends. Investors need to invest in properties that match industry demands. For 2019, that’s multifamily properties.
Start your search for multifamily homes for sale here.
Related: Do You Need a Commercial Real Estate Agent for Buying Multi Family Homes for Investment?
Office CBD and retails seeing weakest performance
Offices in the central business district in the US were the only sector experiencing a drop in price appreciation this year. This decline (about 2.2%) triggered a pullback in office CBD investment volume. Office CBD sales are down 17% compared to a 10% drop in suburban office sales.
The retail sector isn’t performing much better, based on the commercial real estate trends for 2019. Demand has been relatively weak and retail continues to slip. Retail pricing isn’t increasing at the same pace of the other property types in the commercial real estate market. So retail and office CBD might not be the best investment for 2019.
Continued shift in favor of secondary markets
The US economy is currently quite strong, with no signs indicating an immediate downturn in the near future. However some key macroeconomic factors – such as population growth, domestic migration, and strong employment growth – have influenced a market shift.
Related: Here’s Why 2019 Will Not Bring with It a Housing Bubble
Certain secondary metros were observed to be more favorable than primary markets. A higher increase in property appreciation is observed in secondary and tertiary markets (6.9%). Whereas, primary markets only have 5.6% in property appreciation.
Digitalisation of the market and focus on visual content
Focusing more on the selling of commercial property, commercial real estate trends are showing signs of increased attention on the visual aspect of listings. The commercial real estate sector has to adjust to the digitization of other markets. The numbers and data are essential to any investment. However, pictures and videos of the property are proving to have a heavier weight. Buyers spend up to 60% of their time on a property page just looking over pictures. Uploading more professional photos will definitely leave a stronger impact on interested buyers.
Great pictures draw more attention and can speed up your sales cycle by up to 32%. The commercial real estate trends regarding technology are definitely more long-term based. However, using professional photography for your property listings can definitely improve your business. It’s about time the commercial real estate market caught up with the rest of the world.
Final Words on Commercial Real Estate Trends to Expect in 2019
To sum everything up, having the upper hand in the commercial real estate market means knowing what to expect. Commercial investors need to be proactive by keeping track of commercial real estate trends. Doing a little bit of research on investment properties will point you in the right direction.
So for the commercial real estate trends 2019, it seems to be that:
- Multifamily properties and industrial assets are the investments to make
- High construction costs, along with other factors are slowing down the construction of offices
- This doesn’t seem to be much of a problem since office CBD and the retail sector is experiencing a slowdown in sales
- Visual content also seems to be a strong influencer in the sale of your commercial property
Keep these trends in mind as we move into 2019.
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