What Will Happen to Commercial Real Estate in 2018?

The Different Pros and Cons of Investing in Real Estate Commercial-Real-Estate

Carolin Perterson, World Executives Digest | Most experts agree that we can expect economy to continue developing and growing in 2018, which is exactly what can be said about the commercial real estate environment, too. So, let’s take a look at some realistic expectations related to this field.

Experiential retail focus

One of the things predicted is that the focus on experiential retail will become even greater. With the changes in demographics and a shift from offering products and services to providing experiences, it’s quite normal that most real estate will be bought by younger people. That means that the offer has to match the expectations of this new, powerful target group.

More efficient offices

As we are witnessing the increasing popularity of working from home and co-working, it comes as no surprise that the office footprint will most likely continue to get smaller. With all companies trying to find every possible way to increase efficiency, which includes cutting down the costs, we can expect to see a growing demand for smaller, yet more smartly designed offices. On the other hand, despite the fact that more and more people are working from home, it’s still unrealistic to believe that office workspace will become obsolete. What we are likely to see, though, are more flexible working environments, which boost productivity.

Caution, despite progress

With almost everyone agreeing that commercial real estate is going to remain strong in 2018, some experts claim that only big cities and unique properties built by using only the best construction materials, such as those provided by AIMR, will actually see their prices go up. Also, we can expect a minor drop in the price of commercial real estate. Still, experts say this is perfectly normal and that the focus is now on quality, more than ever.

With a booming economy, sellers will probably try to negotiate higher prices, but buyers will also recognise rising interest rates and will be reluctant to meet sellers’ demands. As a result, we might see a slight decline in unit sales. This may also be an indicator of what will come next year.

Changes in retail, multifamily and industrial real estate

It was only natural for shopping malls to become less popular, because so many of them have been built over the years, that there’s no longer enough demand in most cases for such establishments. Instead, individual stores are slowly becoming more in-demand. Bearing in mind the fact that more stores were opened than closed in 2017, it’s logical to conclude that the rental prices in this sector will increase in 2018, which is completely different from some predictions made not so long ago.

When it comes to multifamily and industrial real estate, we can see that the former remains popular, though not as much as before. One of the reasons is definitely the fact that although the number of people who usually rent real estate is going to increase in the next couple of years, we can see that it will start falling after that period. Finally, if we take a look at all the warehouses built to accommodate online retailers’ needs, it wouldn’t be far-fetched to conclude that this segment too will slightly weaken.

Although it’s often very difficult to make a prediction with great certainty, many indicators and history can tell us what we can expect when it comes to commercial real estate in 2018. It’s only our job to adapt to the inevitable changes as well as possible, so that we avoid suffering great losses.