December 11, 2018, Champaign Williams, National Editor Bisnow
Commercial Real Estate Trends To Dominate In 2019
Goodbye 2018, hello 2019! As the new year approaches, Bisnow spoke with several industry execs, researchers and economists to uncover the major trends expected to dominate the commercial real estate industry in the coming year. From the rise of opportunity zones to a slowdown in industrial absorption, these are trends experts forecast for 2019.
Everyone is on the lookout for signs of the next recession, as the economy nears its 10th year of expansion — its longest period of expansion ever.
“In the history of U.S. business cycles, downturns have typically occurred within one or two years after the economy has reached full employment,” JPMorgan Chase Commercial Banking Head Economist Jim Glassman said. “A careful examination of this historical regularity indicates, however, that this pattern has been the result of two imbalances — a building inflation problem that requires the Fed to adopt a restrictive policy posture or unprecedented financial imbalances.
“In that regard, there are no obvious imbalances that have the potential to trigger a downturn, so the current expansion is likely to settle into a lengthy period of balanced, noninflationary growth.”
Though U.S. economic growth and job gains were strong in 2018, some economists and analysts predict the economy will slow in 2019 due to continued short-term interest rate bumps by the Federal Reserve and waning fiscal stimulus from federal tax cuts.
“Inevitable disruption is probably the appropriate risk strategy mode to be in for 2019. Real estate is not immune from business cycles, economic recessions or disruptive black swan events — such as a trade war, currency crisis or cyberterrorism,” Conway said.
“Though property markets peaked for this cycle in 2015, leasing and sales transaction activity remain robust and pricing firm,” Nelson told Bisnow. “Transaction volume through Q3 2018 [was] 11% above its level for the comparable period last year and is approaching the total closed in 2015 — the peak sales year for this cycle.
“While all four core sectors have shared in this year’s gains, apartment and office — perennial investor favorites — have posted the highest sales totals and the strongest price appreciation to date. But both [will] likely slow sharply in the next two years, along with price appreciation and rent growth, as the economy slows or even turns negative.”
Industrywide PropTech Adoption To Accelerate
Commercial real estate professionals — from owners and operators to brokers and architects — can no longer deny the impact technology is having on the industry. More real estate firms are embracing the latest innovations to streamline work tasks and create a more paperless, transparent approach to sourcing deals, managing assets, analyzing data and closing transactions.
Mihir Shah, co-CEO of JLL Spark — JLL’s PropTech division that has a $100M global fund dedicated to investing in real estate tech companies — told Bisnow that PropTech companies have become increasingly valuable as their products have helped real estate firms further their initiatives.
“As part of this effort, we are seeing companies that typically went through long RFPs showing interest in piloting new products to see which ones are viable. This helps them prove [return on investment] faster and helps the winners grow faster,” Shah said. “This willingness to try new things will help PropTech adoption in 2019 and beyond.”
Investment In Value-Add Assets To Help Assuage U.S. Workforce Housing Availability, Affordability Concerns
Demand for available and affordable workforce housing options will remain a topic of interest in the multifamily sector, as expensive land and development costs make it increasingly difficult to build affordable housing from the ground up. This is particularly a pain point in urban metros, JPMorgan Chase Head of Commercial Real Estate Al Brooks told Bisnow.
“The ongoing job growth we’ve been experiencing in the U.S. is having a huge impact on workforce housing affordability in major cities. This influx of talent continues to be fueled by the need to be in close proximity to work, the convenience of mass transit options, as well as the appeal of being at the center of the action in major metropolitan areas,” Brooks said.
CBRE Americas Head of Multifamily Research Jeanette Rice said investment in value-add multifamily assets will help assuage these concerns.
“Workforce housing will also remain appealing in 2019 due to demand outpacing available supply, thereby keeping vacancy rates low and rental growth above the overall multifamily market.
“Investor interest will also remain very high in 2019. Interest is coming from all types of capital, including institutional and foreign capital as well as traditional sources like smaller private buyers. The appetite for workforce housing is very strong for better property fundamentals and higher yields. Value-add investment will likely still dominate in 2019 and remain largely successful. Acquisitions of a stabilized product will also be appealing for some investors, particularly those with longer-term hold horizons,” Rice said.
Much more can be read in the Bisnow article, however, the gist of this is that the commercial real estate market is set for even bigger gains in the coming year. You see opportunity, however, your bank is very slow to approve any mortgage and this long period of time can make you lose out on the property you are trying to purchase. This is where a hard money lender in Tampa help. Most are far quicker than banks. This will allow you to purchase the property and then take your time with your bank to get financial institutional financing in place (which can take six to eight months!) One of the most experiences Hard money Lenders is TempBridge Inc. Their knowledge and access to funds put them head and shoulders above their competition. Check them out at www.tempbridge.ca.
