As promised, here are the final five trends that are likely to make 2020 a great year for commercial real estate owners and users. If you missed Part 1, check it out here.
6. Another Great Year for Industrial
The industrial markets showed some limited signs of slowing in 2019. However, going from superheated to very warm isn't a bad year. It's just a less wonderful one. 2020 should be similar. Between more growth for the e-commerce sector (there's room -- it was just 10.7 percent of total sales in the second quarter of 2019 according to the St. Louis Federal Reserve bank!) and the potential repatriation of manufacturing, 2020 will be another great year to own industrial space and a tough year to lease industrial space. While some research shows growing levels of spec building to meet demand, most of that spec space appears to be getting leased out very quickly -- before the building is completed.
7. Experiential Retail to Remain King
The opening of the American Dream mall at the Meadowlands in New Jersey highlighted a trend that is going to grow in 2020. Retail space isn't about shopping any more. That major new mall is only 45 percent retail -- the rest is restaurants, entertainment and other non-shopping related uses. The future of retail isn't Macy's driving people to a Gap. It's people grabbing a bite after indoor skydiving and maybe picking up some cute novelty socks along the way.
Keep in mind that this trend towards experiences will continue to expand to office space design. People don't want to shop in an endless strip of rectangular stores. And they don't want to work in a warren of cubes or a never ending strip of trading floor desks. Experiential office space isn't a trend -- it's a reality.
8. Cheap Debt's Not a Trend.... It's a Reality
2020 will be yet another year of relatively low interest rates. While the Fed is unlikely to keep dropping rates barring a serious contraction, the dollar is strong, and the financial markets seem to have low interest priced in. This means that capital for expansion should be reasonably priced for your business. At the same time, it also means that landlords are able to enjoy healthy cash flows from their buildings. That's the good news.... Here's the better news.... It's likely that 2020's relatively low interest rates will continue beyond 2020, as well.
9. Vote For.... Inaction
Given that 2020 is an election year, it's reasonable to expect that a portion of small to mid-size building and business owners will slow down decision making as they wait to see who ends up in the White House. This is a typical pattern during election years and could lead to opportunity at the end of the year as your competition potentially sits out transactions and takes a wait-and-see approach.
10. New Neighborhoods To Choose From
Opportunity Zones have been a hot topic since they were first created in the latter part of 2017. However, construction has been slow to start. 2018 and 2019 saw a combination of new rules being written and funds being created. 2020 should see the beginning of new developments actually breaking ground. Even if your company is not structured to directly take advantage of the tax savings opportunities, you could see new properties coming online in new neighborhoods. Because so many downtowns and emerging downtown-adjacent neighborhoods are designated as opportunity zones, keep your eyes open this year for new properties that could be great homes for your business.
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