2020 is off to a strong start and this momentum is expected to continue as far as the commercial real estate market is concerned. Low interest rates, strong economic activity, a sound foundation to grow from and continued enthusiasm in the CRE market as a solid means of investing are all factors supporting this prediction. However, just as with each year prior, both the market overall and each sub-category within it is sure to undergo some slights changes. Here’s a bit about what to expect as we roll further into the next decade.
Overall Investment Prospectus
While economic growth has slowed down and global uncertainty has risen (particularly with issues such as the U.S. and China trade conflict in full effect), it appears that the commercial real estate market will continue to attract investors at a steady rate. There is likely, however, to be a slight reduction in volume initially as investors move forward with a bit more caution and discrepancy than in 2019. Income returns are predicted to remain reliable, although appreciation returns may not be as steady as years’ past. Overall, barring any unexpected liabilities, fears of a potential recession seem to be far on the back burner as we move into the year so far.
The office space sector of the commercial real estate market appears as though it will remain strong, despite the likelihood that vacancy rates will rise as new construction overshoots demand. Flexible office space is expected to become even more accessible, rising to 2.1% of the entire United States commercial office space market. The growth rate here is, however, expected to drop from 23% in 2019 to 13% in the upcoming year. The majority of leases will be driven by technology-based companies, meaning that high demand will continue in areas like Austin, San Jose and Salt Lake City, among others.
The multifamily sector has experienced major growth over the past decade. While this trend is absolutely expected to continue, broad investor interest over the past years has created a scenario where new construction is beginning to outweigh demand so the growth rate will very likely slow. Rent control legislation will remain a hot topic and area of concern within the industry. Small metro markets and metro leaders as well as suburban areas will offer the best opportunities for successful multifamily investments this year.
New construction in the retail industry has dwindled significantly over the past few years as more and more businesses have gone viral. The face of retail is, however, still alive and well. The health and wellness industry will continue to take up more and more retail space as we move into the decade. You can also expect to see more antiquated mall layouts being converted into mixed-use complexes by large developers.
Within the industrial sector of the commercial real estate market, rents are expected to rise by up to 5%, despite predictions that the available supply of industrial properties will outweigh the demand. This expected growth is largely attributed to the continued rise of e-commerce and the resulting demand for suitable logistics space. While some concern has arisen due to the current trade-related risks, consumer spending appears to be stable and this should alleviate any tariff effects on major hubs.
Record annual absorption was seen in the wholesale data primary markets in 2018. That trend continued in 2019 and is expected to roll right on into the new decade. Providers are expected to offer options that are rich in diversity and allow enterprises to obtain flexible and secure environments that will simplify business. New technologies being adopted are anticipated to create a higher demand for power and fiber access that will support the infrastructure.
Specialty sectors have gained popularity over the past decade, rising steadily over the course of the last few years. This trend is anticipated to continue and alternate investments are expected to represent 12% of all commercial real estate investments by the end of 2020 (around $59 billion worth).
Looking for a Commercial Real Estate Investment Property Hattiesburg or the Surrounding Areas?
With outlook in the commercial real estate sector still looking up, now is the year to embark on your investment journey or broaden your investment portfolio! If you’re looking to invest in Hattiesburg or the surrounding areas, SVN | Southgate Realty, LLC is your next stop. Our team of dedicated realtors are armed with a vast expanse of knowledge in the local market and are ready to help you find the perfect investment property for your current situation. Take a look through our database of available commercial properties today and reach out to one of our team members to get started!