Rising CRE Property Prices Cause Concern
“Concerns are growing around commercial property prices, which have dramatically shot up by 85 percent in the past seven years. With interest rates recently rising, commercial prices could decline, and commercial investment sales may see an additional dip, though at a modest pace.”
- Lawrence Yun, chief economist of the National Association of REALTORS® at the 2018 REALTORS® Legislative Meetings & Trade Expo
Virtual Reality and Other Disrupters Impacting Retail
- The Revolution Starts Now: Retail Refusing to Fail, Colliers Retail Market Spotlight Report
“Retail technologies have been stealthily invading the landlord and tenant space to expand the real estate market interdimensionally. The concept of an alternate or extended reality is concrete and palpable. It no longer exists in theory but is actively practiced by a handful of enterprising retailers and brands to captivate consumers' imagination and engage them with products and services on a cerebral level.”
Hospitality - Heightened consumer confidence, the new tax law, and a steady rise in employment growth continue to drive hospitality demand. Supply is rising steadily, with most hotels falling in the upscale and upper-midscale segments. The bulk of completions are centered in larger markets, with the most rooms under construction in New York City; Nashville, Tenn.; and Dallas/Fort Worth, according to Marcus & Millichap. Pod hotels designed for price-conscious millennials, as well as other new brands, reflect a realignment in strategies by hotels to appeal to a wider audience of travelers.
Industrial - Vacancies hit an all-time low across the U.S., as rent growth outpaced other sectors, according to Marcus & Millichap. The expansion of online shopping has increased demand for warehouse, data centers, and distribution space. The increased demand also is propelling a structural shift in the sector, leading to a reorganization of space requirements and property locations for retailers and third-party logistics providers. The demand for businesses to be closer to their final customers is turning many vacated big boxes into last-mile fulfillment centers.
Multifamily - The market remains on track for the second-highest annual completions coming in this year for developers. Fueled by strong rent growth, low vacancy, and rising wages, multifamily is the second most popular U.S. real estate sector for foreign investors, specifically from Canada and Germany, according to JLL's 1Q18 Investment Quick Look report. An increase in long-term renters and a limited inventory of properties for sale continue to aid growth in the sector.
Office - Market growth continues, but at a slower pace due to higher completions and the tight labor market's impact on tenant demand. The U.S. is experiencing the largest labor shortage in history, and this is keeping companies from full capacity and taking a toll on commercial real estate, according to JLL.
Retail - Changing consumer expectations and omnichannel retailing are reshaping retail. Despite major store closings, U.S. vacancy rates held steady at 12.2 percent in 1Q 2018, according to Statista. The National Retail Federation projects 3.8 to 4.4 percent growth for retail sales in 2018, spurred by increased consumer confidence, low unemployment, and a strong economy. But with consumers trending more toward off-price and discount retail opportunities, mid-range retailers will have to seek new ways to compete with lower-priced competitors.