Commercial Real Estate Trends You Should Be Aware Of

Commercial Real Estate Trends You Should Be Aware Of

Throughout the past 3 decades, the commercial real estate industry has gradually evolved into an impressive enterprise filled with complex and global portfolios that make up a whopping 10 percent of institutional investments, equaling an estimated $6.7 trillion.

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In Illinois, commercial real estate investments are breaking records. According to Real Capital Analytics (RCA), a New York based research company, investors dropped record breaking amounts of money on industrial, retail, office, hotel and apartment properties in Chicago in 2015- resulting in $22.64 billion in sales. Up an astonishing 44 percent since 2014, that number will be difficult to beat in 2016. Such demand is enticing pre-crash investors to cash in on their properties. The owners of the Willis Tower, for example, sold the property for $1.3 billion in June of 2015- the highest amount ever paid for a commercial office building outside of New York.

Growing concerns about an economic slowdown, however, have caused many investors to become more cautious in 2016. According to Jim Costello, the Senior Vice President of RCA, the commercial real estate market offers investors a “safe haven” from turbulent financial markets, and investors should not be worried about the market reaching its peak as yet. Additionally, with the United States property market being the most stable in the world, international investors’ assets rose to an astounding $62 billion in 2015, and that number is only expected to grow throughout 2016.

Other Trends that are Predicted to Affect the U.S. Commercial Real Estate Market in 2016

  • Urbanization: As the trend towards urbanization continues, even in suburban areas, the demand for commercial real estate continues to rise. As millennials and boomers alike have begin to seek more convenient access to shopping, employment, healthcare and other amenities, there will become a growing demand for retail, office and other commercial property types.
  • Technology in the Retail Sector: Technology trends, including the evolution of online shopping, could have a significant impact on the value of retail properties in 2016. For the first time in history, online purchases surpassed in-store purchases in 2015. A new trend, however, that features a combination of online shopping with the in-store experience is expected to keep demand in check.
  • New Construction: Since the last recession, lenders are skeptical about funding new commercial construction. In fact, many lenders have left the commercial development business altogether. In its place, repurposing existing properties is often viewed as less risky for investors.

 

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