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Commercial Real Estate Trends for 2016

The Commercial Real Estate (CRE) industry now seems to be in a solid grip compared to the previous years. While the US economy continues to progress, the investors see incredible performance across most of the property types and markets. So, what would be the future of Commercial Real Estate? Will it be fruitful? Here are the 4 trends that are expected to play a significant role in the ongoing year.

Global Urbanization:

It looks like the global urbanization trend continues in the US as it does in the other parts, as the Millennials and boomers look out for enhanced access to jobs and amenities, from shopping to healthcare. It’s been noted that the US urban population has increased by 12.1% from 2000 to 2010, outpacing the nation’s overall growth of 9.7%. And, even the sub-urban seem to be taking more of an urban form, having mixed-use development and limited automobile dependence. While this trend of urbanization continues, it creates a huge demand for retail, housing, offices, and other property types.

The rise in Interest Rates:

The interest rates seem to rise for sure this year; the forecasts may vary, but it’s more likely that the Federal Funds Rate (FFR) will rise at least to 1% in 2016, with the treasuries of 10 years pushing fractionally higher towards 3% mark. Of course, there are several factors for the low interest rates for now, like limited inflation and the strong dollar. But, the Federal is more likely to weigh the effects of every move before it adds friction to the current economic growth trends.

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Increased Capital Flows:

US property market is the most stable and transparent market globally because it has been an easy choice for many investors. According to Real Capital Analytics (RCA), a research firm, just the foreign purchases of US real estate properties rose to $62 billion, with Norway, Canada, China, and Singapore leading the wave. Looking at these statistics, a substantial proportion of the Association of Foreign Investors in Real Estate expects an increase in US investments.

Limited Supply Additions:

Limited supply additions seem to continue with only modest supply growth in the sectors like multifamily housing, student and senior housing, single-tenant industrials, etc. As the last recession was a bit deep and protracted, the lending sources were extremely doubtful about funding new constructions. Also, many local and regional banks were hit by the residential mortgage crisis, and both commercial and residential real estate were seen as hazardous sectors. Because of this, many lenders decided to leave real estate, which resulted in limited supply.

Looking at the above-mentioned points, we can say that the property landscape of the US in 2016 will almost be similar to that of 2015. Also, many economists say that the employment situation of the US would remain on its current path adding the demand for housing in various forms.

Sahana Jai, the author of the above article, works in a real estate concern offering office space in Bangalore. She is a blogger as well as a web enthusiast. She writes articles, posts based on the needs and future of real estate in Metropolitan cities.