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5 Commercial Real Estate Trends to Watch for in 2017

Posted by Loan Closed

5 Commercial Real Estate Trends to Watch for in 2017

Learn about the trends that will be affecting the commercial real estate industry this year.

2016 had some surprises that are sure to impact the commercial real estate industry and the economy as a whole in 2017. The United States economy continues to grow moderately and add jobs. The unemployment rate is also decreasing and there have been continuous employment gains. This has led to the higher demand for housing, office space, retail spaces, and industrial and distribution facilities.

While some fear that this promising economic cycle is coming to an end, the prolonged recovery has shown that this period of growth is likely to continue for about another two years. The following 5 trends are likely to play a critical role in the commercial real estate industry in 2017.

1.Economic and political uncertainty around the globe

The global climate is currently characterized by economic and political uncertainty, with events like the Brexit vote and the election of a new and controversial president in the United States. While these uncertainties are not yet fully understood or resolved, the impact on the commercial real estate industry will likely be positive. The IMF is also predicting strong global growth as emerging markets make gains, which will provide more real estate inflows into the US market.

2.Increased foreign investment in the US

We can expect increased foreign investment as the US becomes a safe haven. The US market is stable, transparent, and boasts high yields, making it a popular choice for foreign investors.

3.Higher interest rates

The Federal Reserve announced last December that they were raising interest rates by a quarter of a percentage point. Higher interest rates could make real estate less affordable and therefore curb property deals. Nevertheless, higher interest rates signify that the economy is strong, and a healthy economy is associated with a growing real estate market.

4.Less financial regulation

The Trump administration has expressed its desire to dismantle the Dodd-Frank Act. While it’s not likely that the act will be repealed entirely, it may be reduced. Excess financial requirements tend to stifle lending, so loosening financial regulations could make things easier for financial institutions. However, less regulation also has the potential to cause another financial crisis.

5.Renewed confidence in commercial real estate

Property values are approaching what they were in 2008, and it’s not a false bubble. Investors are feeling renewed confidence. The elimination of regulatory barriers and lower tax rates ought to lead to growth in various sectors of commercial real estate, from multifamily housing to hospitality to industrial facilities. 

The commercial real estate industry is anticipating changes to regulations and tax structures. While this contributes to a feeling of uncertainty, it also signals the opening up of new opportunities for growth.

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