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Trends to Watch for in Commercial Real Estate This Year

Posted on: March 24, 2018

Upcoming Commercial Real Estate Trends

2018 is well underway with several anticipated commercial real estate trends that have started to come to fruition.

Analyzing the trends can be helpful as you plan your next commercial real estate move, along with meeting with a knowledgeable South Florida commercial real estate attorney.

Below are a few of them as identified by industry experts.

Positive Growth Across Most Sectors

The commercial real estate outlook for 2018 is sunny for South Florida and many other regions mainly because of continued economic growth.

The U.S. economy is expected to expand 2.7 percent this year and 2.4 percent next year. With consumers having more money, real estate pricing and rental returns have increased in several metropolitan regions. Recent tax reform has further benefitted the industry despite disruptive changes occurring to the retail sector.

Lawrence Yun, National Association of Realtors Chief Economist, predicted that rents will be mostly positive across all sectors, although there “will likely be a modest correction in big cities and for trophy properties.” He also noted that there was overall price growth of 90 percent over the past seven years.

Increased Foreign Investment

The U.S. continues to be one of the most stable property markets in the world, driving investment from several less stable foreign countries. Capital inflows are expected to rise throughout 2018 for a variety of real estate assets from commercial to residential and industrial.

From January to December 2015, foreign purchases of U.S. real estate assets rose to over $87 billion. In a buying surge soon afterward, foreign buyers purchased an incredible $153 billion of residential property from April 2016 to March 2017. Foreign investors have also purchased over $365 billion in U.S. commercial real estate since 2010.

China is expected to continue its recent trend of large-scale investment in U.S. real estate. In 2017, China remained the top source of foreign investment in commercial and residential real estate in the United States, along with Mexico, Canada, the UK, and India.

Interest Rate Hikes

After the benchmark lending rate increased a quarter percentage point in December 2017 and with a recent Fed hike from 1.5% to 1.75%, it is a continued sign that the economy is strong.

The Fed anticipates a total of 3 rate hikes this year. Although this may mean that borrowing becomes more costly, it is not likely to cause a slowdown in commercial real estate investment in several regions including South Florida.

If you are wondering how these trends affect the local market, or if you are involved in a commercial real estate deal, contact Mark Schecter at Schecter Law at (954) 779-7009.