Every year different trends emerge in the commercial real estate market. While some of these trends fade away, others transform into long-term practices that ultimately enhance business. By knowing more of what to expect, you have the ability to position your business in a way that will prove beneficial. A number of commercial real estate trends that you can depend on year-after-year include those provided below.
End of the Bull Market
The bull market for commercial real estate has existed for five years, which is not an indicator as to how long it will last. In reality, it will take a dramatic increase in interest rates or an unpredicted economic downturn to stop the bull market. While the commercial real estate market may be growing slow, it is on a steady course.
Growing book value, high profitability, improved productivity, and relatively neutral labor cost growth have put many companies in a good position. For this reason, demand for greater space continues. With the exception of multifamily within certain markets, the fundamentals remain good to include extremely low levels of supply.
Increasing Interest Rates
Another trend that you can count on for the commercial real estate market has to do with interest rates. In addition to the Federal Reserve having signaled that the increase in rates will be gradual, it has reminded professionals in the real estate industry that current rates are at a historical low. Due to a more modern take on financial regression, real rates may remain low.
For instance, through accounting and regulations, both insurance companies and pension funds have been forced to purchase a higher number of bonds while massive amounts of government debt have been bought by central banks with no indication of selling. Therefore, even if interest rates increase a small amount, the cost of capital will remain low.
The Battle between e-Commerce and Brick and Mortar Retail
e-Commerce retail is growing at double-digit rates. Today, many consumers feel the online shopping experience is not only faster but also less expensive and more convenient. As such, as much as 15 percent of all brick and mortar retail centers have become obsolete from a functional perspective. For instance, suburban malls are either downsizing or disappearing.
The future of some brick and mortar retailers, as well as retail platforms, will continue to be determined by housing markets and economic growth. However, it is becoming more evident that to survive, these retailers have to make significant changes to the business model. One way to accomplish this is by incorporating e-Commerce.
Interestingly, many people still enjoy going to the mall or a standalone retail store to shop but considering the ease in which items can be purchased online, followed by being delivered directly to the front door is what gives e-Commerce a nice advantage. As a result, the growing trend consists of retailers providing a brick and mortar location coupled with e-Commerce for online shopping opportunities.
Another trend that you can count on as a commercial real estate professional is the value of blogging. By providing current and potential customers with news, information, ideas, and more, the business will grow. However, it is imperative for blogs to be professionally written. If you want to incorporate blogs into your marketing strategy, our professional writers can help. At The News Funnel, we can offer guidance or create content on your behalf, based on the message you want to deliver.