Changes in the commercial real estate market continues to develop amidst the economic uncertainty of the COVID-19, 2020. So, we strive to understand its possible effects on real estate market trends. In last month’s blog, we discussed some immediate changes in residential real estate due to the pandemic, but there are upheavals across the board and commercial real estate is not exempt. In the commercial market, integration of technology that affects all levels of the industry brings accessible, on the go transactions. There still exists a solid cautious optimism that persists among investors, and steps can be taken to capitalize on changing opportunities for investors and tenants that 2020 will offer.
Commercial Office Space
Rising construction costs correlates to more tenant improvements. The construction industry has been plagued by a shortage of qualified skilled labor and this has dramatically increased construction costs. A popular option for co-working spaces has decreased the volume of transactions for traditional direct office spaces. Tenant retention options, especially among millennial’s. favor more flexible lease terms and scalability as they aim to relocate in business districts rather than traditional office towers.
Technology and life sciences industry is rapidly growing along with the need for highly-specialized space to facilitate research, development and production. An investor searching to attain stronger yields than those offered by traditional office or industrial acquisitions might want to consider alternative assets for portfolio diversification. Investors hoping to adapt and innovate should focus on research, education, industrial, hotel, retail, life sciences, and medical. Consistently engaging in challenging new ideas enables investors to improve their professional judgement and react when necessary.
Commercial Real Estate Housing Shifts
According to the Urban Land Institute, housing markets are shifting over to millennial’s, the new wave of homebuyers. Millennial’s have begun to enter the real estate world with a focus on suburban areas. Not only are they searching for amenities, they show a high interest on walkable neighborhoods in proximity to community resources. parking and trash pickup. The focus is shifting to additional features, like roof access, common areas, and even designated work spaces. This is good news to investors hoping to break into the commercial realm. Recently, suburban areas represent the new market aimed at providing mixed use and retail work-spaces.
With an increase in green building practices and ecofriendly housing features, energy efficiency should positively influence real estate investors with a focus on new construction and flipping houses. The National Association of Home Builders detailed the decision of 80 percent of homebuyers. Features included in the survey were Energy Star appliances, above-code insulation and properly insulated windows. These buyers leaned towards as much ecofriendly construction as possible, and investors looking for a quick sale should aim towards having these amenities included in what they decide to purchase for resale.
Real estate investors hoping to achieve success will need to grasp future opportunities in order to thrive in this new market. Changing homeowner demographics, and commercial unit amenities are destined to become the wave of the future. This new prospect of impending market changes will give investors a good grasp on whatever is ahead in the commercial market. The future of real estate will be driven by new technologies, new demographic groups entering the real estate market, and the transition to buyer-agent relationships.