As 2018 comes to a close, it's time to look ahead to the New Year. Let's take a look at some of the major trends predicted for the commercial real estate sector and analyze how they can impact commercial real estate tenants like your company.
1. The Industrial Real Estate Boom Will Continue
With e-commerce growing at a record pace, huge online retailers are snatching up industrial space across the country to house logistics and warehousing. The CBRE's Outlook Report for 2019 states that vacancy levels in industrial space has dropped to 4.3 percent, a historic low, and predicts that the trend will continue in the new year. For tenants, this means that rental rates will be high in many areas. If you'll be looking for new space in the coming year, be sure to leave yourself enough time to conduct a thorough search, to consider numerous options and assess whether or not you can lock your company into a longer term to get the lowest rate possible.
2. A New Brick and Mortar Retail Boom Will Begin
Large retailers shuttering their stores has led to a glut of empty spaces in shopping malls across the country. In 2018, many online-only retailers seized the opportunity to rent these vacant storefronts and establish brick and mortar footprints for the first time. Experts predict that more companies are likely to follow retailers like Amazon, Casper and Athleta's moves to brick and mortar, increasing the demand for retail space. For companies that rent retail space and are looking to expand, the first half of 2019 may be the last chance to acquire leases for new storefronts at low rental rates.
3. The Adoption of Commercial Real Estate Tech Will Grow at a Fast Pace
Global funds are investing heavily in real estate tech companies, providing startups with innovative technologies that simplify everything from research to property management with funds needed to launch. You can expect to see a wealth of new technologies that could be beneficial to your company, and the chances of your competitors seizing the opportunity to use new tech are likely to be high. If you haven't already, 2019 is the right time to begin integrating tech into your commercial real estate lease portfolio.
4. Millennials Will Be Migrating to Suburbia
In major metropolitan areas across the country, there has been a shift in housing among millennials. As members of the generation reach their 30s, more are moving out of cities and are settling in areas being referred to as Hipsturbias and Urban-Burbs in suburbs. This means that more trendy retailers will be rethinking urban-only storefronts and that for many companies, it may make more sense to consider establishing offices outside the city limits both to attract talented millennials for recruitment and to save money on lease costs.
5. Costs for Tenant Improvements and Building Maintenance Likely to Rise
Constructions costs rose in 2018 and are likely to continue to rise in 2019 due to tariffs on materials like Chinese steel and Canadian lumber and a shortage of construction laborers. If you're currently leasing in an older building and have rent escalations tied to actual maintenance costs, there is a good chance you'll see greater occupancy costs this year. Tenant improvement budgets will also not go as far, meaning that your company may have to pay more out of pocket if you're building an office to suit your needs in 2019.
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