5 Heated Trends Driving the Commercial Property Marketplace in 2017
1) Millennials and their Purchasing Power
A recent LinkedIn analysis unpacked the data and numbers to find out where the millennial talent is headed and the reasons behind the moves. According to the report, millennials make up 44% of the job market, are the largest generation in the world and with purchasing power expected to top over $200 Billion in 2017! They are flocking to the midsize and smaller cities and well-informed of the rising prices of living required to live in the largest high-profile cities of Los Angeles, San Francisco, Seattle or New York. Reasons given for flocking to the midsized and small cities included: wanting to avoid long commutes and traffic, better weather for year-round outdoor activities, jobs in less competitive markets, more opportunities to rent or buy reasonable housing combined with lower costs in living. Midsized and smaller cities that can offer some of these benefits are reaping the profits from the powerful purchasing power of the millennial generation!
2) Rocketing Growth in Midsized and Small Cities Shift Investor’s Focus
High-profile megacities may garner the most attention in the news and entertainment world, however, midsized and small cities are where most of the population live, work and play. Population growth is slowing down in many of the global gateway cities and swelling in surprising places. Investors are rapidly taking notice of these changes. In the “Hottest U.S. Commercial Real Estate Markets” from Ivestopedia - “Investors primarily focused until recently on major cities like New York and San Francisco as the economy expanded. But prices have surged to mindboggling levels, pushing investors to seek deals in smaller markets like Miami, San Jose or Dallas.”
3) Merge of Residential and Commercial Properties
Startups based on the sharing or collaborative economy, like Airbnb or WeWork, are disrupting the way organizations lease and use commercial real estate. WeWork is a company that provides shared workspace, community and services for individuals and businesses. WeWork initially attracted mostly freelancers and entrepreneurs with their millennial-friendly co-working, collaborative spaces. Now WeWork counts GE, Liberty Mutual Insurance, KPMG and other large, formerly traditional companies as tenants. Companies that offer office spaces with flexible terms and customizable solutions are exploding in popular cities. Work/Loft spaces are also increasingly being utilized by professionals from all backgrounds. Commercial and Residential Realtors are seeing their industry broaden and blend in increasingly creative ways.
4) Increasing Demand for Industrial Sector in Commercial Markets
Consumer confidence was strongly positive for the first quarter of 2017 amid increasing employment and accelerating wage growth predicting that consumer spending and retail sales (which accounts for approximately 70% of U.S. economic output) will continue to accelerate. Warehouse and distribution space for the retail market, including eCommerce sales is expected to continue to be in high demand with manufacturing production set to rebound to positive territory and auto sales expected to remain strong. According to the CBREs newly released Americas Investor Intentions Survey 2017, the industrial sector is now considered the most attractive property type for investment in the U.S. and more than half of institutional investors plan to deploy more than a billion in this sector.
5) Green and Efficient Buildings
The LEED Green Building Rating System (LEED) is a program that provides third-party verification of green buildings. The “Berkeley Planning Journal” definition of the LEED rating systems address both a wide variety of buildings types, including commercial buildings, homes, neighborhoods, retail, healthcare, and schools, as well as every phase of the building lifecycle including design, construction, operations and maintenance. Projects may earn one of four levels of LEED certification (Certified, Silver, Gold or Platinum) by achieving a given number of point-based credits within the rating system. LEED is not the only certification in place in the U.S. but is the most prolific with 16 billion square feet of commercial space inspected and certified. Business Brokers, Commercial and Residential Realtors and all professionals involved in the construction, buying, selling or leasing of a space already know that a building or property that holds certifications verifying its status as being “green and efficient” has ever increasing value.
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