Original Article: December 11, 2018 Bisnow Champaign Williams, National Editor
Most economists still project a robust commercial real estate market despite the Fed’s policy of continuing to increase interest rates and the political uncertainty brought on by Washington gridlock.
With robust jobs growth continuing to increase at a healthy clip and the unemployment rate steady at 3.7%, a 50-year low, Fed officials hint that they will likely continue their course of action in 2019 to gradually boost short-term interest rates to temper inflation and maintain a stable economy. Big Wall Street banks polled by Reuters expect central bankers to boost rates another three times in 2019.
It comes as no surprise that industrial real estate assets would be an anticipated favorite for investors in 2019, along with multifamily assets, according to ULI’s 2019 Emerging Trends report. More interesting is the fact that retail is expected to attract interest from investors in 2019, particularly those assets ripe for redevelopment and upgrades. “The retail real estate industry has experienced significant change in recent years, and the transformation is profound and will continue throughout 2019. The convergence of brick-and-mortar and online retail will continue to create major seismic shifts in the industry,” TD Bank Head of Commercial Real Estate Gregg Gerken told Bisnow. Though a wave of retailers filed for bankruptcy and shuttered stores this year — including Sears, Mattress Firm, Nine West and Claire’s — the circumstances surrounding most store closures next year should be vastly different, CBRE’s Cordero said.
CBRE said in its 2019 U.S. Outlook report that office net absorption is expected to reach 37M SF in 2019, representing the sector’s 10th consecutive year of positive absorption. Should the country continue to experience strong office-using job growth in the new year, it could lead to strong absorption rates and renewed interest from investors.
The hotel sector is expected to experience a record-breaking year of occupancy levels in 2019, according to a forecast from CBRE Hotels America Research. Occupancy levels are expected to surge to 66.2% next year, the 10th consecutive year of growth. This increase will be driven by a 2.1% increase in demand to offset incoming supply.
As investors await finalized guidance from the Department of the Treasury and the IRS regarding the Opportunity Zone program, the hunt is on for assets and investment opportunities in these designated areas that present the strongest upside potential. Investors are lining up to pour billions into Opportunity Zone Funds, with a report from Real Capital Analytics stating there is more than $6 trillion in unrealized capital gains eligible to be deployed into opportunity zones.
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.