2019 End of the Year Commercial Real Estate Wrap Up
Despite the challenges brought about by a slowing US economy and uncertainty in the global markets, commercial real estate managed to show modest gains in 2019. By the third quarter, transactions and prices were higher than the same time last year. Consumer spending remains strong thanks to low unemployment and competitive interest rates—key factors that influenced the market trends of the year.
The retail industry continued to evolve throughout 2019 in response to changing consumer spending habits. Payroll jobs in the sector decreased and retail malls remained depressed across the country. Yet, more retail outlets opened than closed during the year, suggesting that shoppers are not ready to completely abandon brick-and-mortar stores.
The multifamily market is still attractive to investors, which has been the trend for the last few years. However, key demographics are changing. Millennials are moving to the suburbs with their growing families, but retiring baby boomers are trading their houses for rentals. Vacancy rates are likely to rise, though, because developers have saturated the market in recent years.
Opportunities in Alternatives
Another trend that continued in 2019 was the popularity of the alternatives industry. CBRE reported in June that demand for warehouse space remained higher than the available development. Other opportunities in the alternatives sector included industrial-flex office space and repurposing closed malls into town centers and medical facilities.
The Internet of Things continued to gain importance in commercial real estate in 2019 as property owners sought to meet their tenants‘ needs. Smart building technology appeals to those looking for more energy-efficient, eco-friendly, and secure buildings. The Internet of Things also aids investors because it produces an impressive amount of data that reveals how tenants are using their space.
CRE has been resilient in a period of economic uncertainty, especially in certain sectors. A key factor in this resiliency is shifting to the changing needs of the consumer.