Commercial Real Estate Trends That You Can Expect In 2018

1. The Economy Will Grow In 2018

The real estate industry is currently riding the waves of one of the longest expansions in its history. But real estate professionals are quite cautious of the potential impact of real estate on individual sector fundamentals. Yet, they are confident that the industry will perform better than the previous year in 2018. Ken McCarthy – the Principal Economist at Cushman & Wakefield – states “We expect the national economy to perform well in 2018. It could be one of the best years of economic expansion in the country. In fact, it is likely to be the best year for GDP growth as well. But there is going to be many differences in performance where regions and sectors are concerned.”

2. Retail Bankruptcy Is Supposed to Slow Down

Moody’s – a research and analysis firm – has released a research report where it states that retail bankruptcies are expected to decline in 2018. They predict that the operating income of the U.S. retail sector will increase to 4.5% in 2018 – up from the 3.5% in 2017. In fact, the sales are supposed to jump to 4.5% as well. Moody’s Vice President Mickey Chadha states that large discount shops such as Walmart will improve since growth investments will start to pay off. On the other hand, drug retailers such as Walgreens and CVS will improve due to increased front-end sales and cost-effective practices.

3. Multi-Unit Properties Will Peak

Yardi Matrix – a commercial real estate research firm – expects more than 480,000 apartment units to come online in 2018. But labor woes in the construction industry may stall the growth to some extent. As per CBRE, 2018 is going to be a strong year for multifamily supply. But it may not reach a peak this year. On the other hand, the Brokerage’s 2018 outlook report states that 2018 will have the second-largest number of units completed during the period. In fact, 284,000 apartment units have been completed at the end of 2017 and 258,000 will be coming online in 2018 – which shows a drop of 9.8% from 2017.

4. Increase in Deal Volume

Transaction volumes had taken a hit during the beginning of 2017 due to the Federal Reserve’s gradual boosts to interest rates and the election of President Trump. Transaction activity has declined due to the gap between seller and buyer price expectations. This happened due to the doubts over the rise in the interest rates and the continuation of the cycle on the buy-side. This gap is expected to close in 2018. This will happen due to the sellers accepting the new paradigm. In fact, investment activity has already rebounded this year and is expected to continue to 2018.

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