The Commercial Real Estate Industry: What's New for 2020
2020 has arrived and analysts have made their predictions about the direction of commercial real estate in the coming year. CRE remains an investment haven, and there’s no indication that it will slow over the next 12 months. Here’s a sneak peek at what’s going to be hot in 2020:
1. The Hipsturbia Boom
For the last few years, the trend of millennials living in urban areas dominated the headlines. Now that more than half of this cohort’s members are older than 30, they’re turning their attention to their growing families. They’re moving away from urban centers in favor of more family-friendly neighborhoods—and even the suburbs.
Although millennials are leaving the big cities, they still want the conveniences of living there. The Urban Land Institute calls these neighborhoods “hipsturbias.” They’re suburban markets that mimic the big-city experience—places where residents can walk or take public transit to work, play, or run errands. This concept should continue to spread throughout 2020.
2. Monetizing the Last Mile
The alternatives sector has been attractive to commercial real estate investors during the last six years. While retail and office suffered, demand for storage space, medical facilities, and data centers boomed. There are certainly challenges in this sector—especially as supply catches up with demand—but there are still opportunities available.
As the last mile evolves, online retailers keep adapting to meet the changing demands of their customers. In their efforts to reduce wait time and streamline the shipping and returns process, retailers are looking for secondary warehouse space. A similar trend is taking place in the restaurant industry where virtual restaurants and ghost kitchens serve customers through delivery services.
3. A Retail Renaissance
Despite concerns about the trade conflict with China, the US economy remains strong. Low unemployment continues to bolster consumer spending enough to fuel economic activity. In fact, CRBE projects rent growth in more than half of the retail markets they track across the country, including Atlanta, West Palm Beach, and Portland. [https://www.cbre.us/research-and-reports/2020-US-Real-Estate-Market-Outlook-Retail] Even more surprising is the fact that, despite the headlines, more retail stores are opening than closing.
The public’s shopping habits continue to evolve. The oldest members of the Gen Z cohort are now young adults with impressive purchasing power and they prefer shopping in a physical store. It’s a form of therapy that lets them disconnect from the digital world and connect with real people. Opportunities within the retail sector include pop-up stores and experiential shopping experiences that blend retail and entertainment.
The commercial real estate industry hasn’t just survived the last few years of stagnation. It has transformed itself to compete in the changing global landscape—a trend that should continue well into 2020.