Five upcoming CRE trends to watch

by MPA29 Oct 2014
As fundamentals are expected to tighten across most commercial real estate sectors in a growing number of markets nationally, what upcoming market shifts or trends will impact the commercial real estate industry the most?  In the latest Jones Lang LaSalles’ (JLL) U.S. Cross Sector Outlook report, the firm looks at investing trends and identifies shifts that should be on your radar, along with providing more clarity on investment opportunities across real estate sectors.

Here are five highlights from the report:
  • For the multifamily sector, strong absorption continues, while an uptick in deliveries is expected to drive vacancy increases across varying markets. JLL also predicts new deliveries will drive an uptick in vacancy and soften rent growth.  Also, cap rate compression will slow.
  • Cashed-up private equity groups will continue to invest heavily in select-service hotel portfolios (Hyatt Place, Hilton Garden Inn, Courtyard by Marriott) with 50 or more assets. JLL also predicts hotel occupancy rates will reach near all-time highs nationally and lifestyle-brand concepts will increasingly emerge at lower price points.
  • Office investment sale activity is expected to grow in select core suburban areas.  The commercial real estate firm also predicts absorption and rents will gain momentum and office construction will increase.
  • Within the industrial sector, leasing market laggards are to be considered prime for value-add buyers; and JLL expects the concept of clicks-to-bricks to emerge within retail. The firm said investors should get ready for upticks related to price per square-foot values, and put their eggs in multiple baskets, as cargo volumes at ports increase.
  • A focus on high-end Class A malls in strong markets, as well as strategic redevelopment in the B mall segment, should continue to bode well in the retail sector, particularly in Sunbelt markets with growing populations such as Orlando, Dallas and Las Vegas. JLL also predicts consumers will begin to leave the wallet at home, as mobile payment technology increases in popularity. Investors should also keep on the look for new concepts, such as the emerging trend of clicks-to-bricks where online stores open offline space.
Marisha Clinton, director of research for JLL Capital Markets, said secondary markets such as Phoenix and Philadelphia are gaining traction with investors seeking higher yields and now, they’re even turning their eyes toward the tertiaries. Click here to watch the video.

To read the full U.S. Cross Sector Outlook report, click here.
 

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