The year is coming to an end, and there are a lot of questions about what to expect in the commercial real estate market as we kick-off a new decade.
As the fear of a recession wanes, most experts are predicting continued growth in the commercial real estate market. Hardy economic activity, strong property fundamentals, low-interest rates, and the attractiveness of real estate as an asset are the driving factors supporting the outlook according to the CBRE 2020 Real Estate Outlook report.
Here are some key predictions for 2020:
INTEREST RATE OUTLOOK
Slow economic growth caused the Federal Reserve to cut interest rates three times in 2019. The economic slow-down is expected to continue due to several issues creating higher levels of uncertainty including slowing global growth, ongoing trade wars, and the 2020 election. Experts predict at least two more cuts in 2020 as an attempt to stimulate the economy and prevent a recession. According to the CBRE 2020 outlook, the federal fund rate is expected to be reduced to a range of 1.0% – 1.5%.
Property fundamentals are predicted to continue on an upward trend but slow from the past two years. According to the report published by CBRE, the tech industry will drive demand for leased space in the coming year. As with most of the commercial outlook, growth in the flex workspace is anticipated to slow.
More retail stores are expected to open than close in the new decade. The recognition of the importance of a physical store to enhance brand awareness has grocers, franchisers and health and beauty brands opening storefronts nationwide. Companies in the health and beauty sector, such as specialty fitness, are leveraging their social presence to increase memberships and drive demand for more physical locations.
The CBRE report points to the six-year growth in specialty sectors including self-storage, medical office space, senior and student housing, etc. Investor interest in these areas has steadily increased recently and will continue in 2020.
Barring any unforeseen risks, commercial real estate is expected to yield positive results in 2020.
About the author
Kevin Caiaccio, founder of Caiaccio Law Firm, has more than 25 years of experience practicing commercial real estate law. His cut-through-the-noise mentality encourages clients and colleagues to be selective and focus on big-picture solutions. He believes in fighting for what’s important and filtering through obstacles that distract.