The U.S. commercial real estate landscape is evolving. Our economy is experiencing its longest-running expansion in history, and that streak is lending greatly to a predicted path of steady growth for the CRE industry for 2020. Echoing that forecast, the Urban Land Institute and PwC’s recently released Emerging Trends in Real Estate 2020 report – findings via 750 individuals and 1,500 survey respondents – paints a picture of long-term economic growth that would be sustainable but slower as we head into the future.
Right now, the report shows that the CRE landscape is primed for investment and growth opportunities. Whether you’re a buyer, owner, landlord, or looking to just now delving into the industry, we’re taking a look at the top commercial real estate trends to look out for in 2020.
Demographics Shaping CRE
As millennials age and Gen Zs step onto the scene, trends show that the younger-age demographics are looking to escape city life and settle down in suburban communities. But we’re not talking single-family homes and mini vans; they want to live in suburban multi-family developments that emulate a work-play-live atmosphere, featuring amenities such as office space, entertainment, and fitness facilities close by. The Emerging Trends report identified communities with access to transportation, scenic walkability, and a significant amount of retail, restaurants, and other activities to be at the top of the “sought after” list.
Knowing this, those looking to invest in commercial property – whether a residential development, retail, food and beverage, or office – might benefit from considering investing in urban and accessible communities outside of major cities.
New Top Markets
In addition to highlighting the importance of live-work-play communities, the Emerging Trends report revealed the top markets for overall investment and development prospects for next year, based on scored awarded by the report’s survey participants. The top 10 that owners and investors should keep in mind included the following.
Raleigh and Durham, North Carolina
Charlotte, North Carolina
Tampa/St. Petersburg, Florida
Los Angeles, California
Most of the top 10 cities are midsized markets that are projected to have among the highest population growth and net migration. While larger metros like Boston and Los Angeles have slower population growth, they have strong and highly sought-after real estate markets that continue to attract capital.
Emphasis on Tech
Technology is nothing new, and we already know that it is always evolving. But as we head into 2020 and beyond, it would benefit commercial property owners and investors to streamline their establishment’s tech. Upgraded and updated technology has the potential to add significant value to CRE properties. From smart building technology used to control lighting, temperature and building access; to sensors and beacons that track and personalize retail traffic; to artificial intelligence that supports and streamlines tenant or customer experience, the opportunities are virtually limitless.
According to Deloitte’s 2020 Commercial Real Estate Outlook, consumer preferences are changing. Due to the increasing demand for urban and global sourcing, changing workforce needs such as flexible locations and workspaces, and technology advancements such as AI and Internet of Things (IoT) is becoming paramount. The challenge CRE companies face is deciding how to prioritize their tech needs and investments. That includes considering the costs of managing both new and legacy infrastructure versus completely replacing old systems with modern-equipped tech.
The Necessity of Safety
According to Deloitte, the ways CRE tenants and end users engage with their physical surroundings is shifting rapidly. As a result, expectations are also changing in terms of a commercial property’s safety and security measures. As real estate tenants’ and end users’ expectations and the ways they engage with their physical surroundings rapidly evolves, CRE companies have to shift their mindset to providing “real estate as a service” offering safe environments and experiences.
Commercial properties with security systems, management, surveillance, and detailed safety measures are expected to impact consumers’ decisions to live, work, entertain, and engage with a property. On the investor end, the cyber risks facing CRE businesses today are on par with the physical risks, and investors want proof that owners, renters and tenants are prepared to manage them. The takeaway? Make safety and security a top CRE priority in 2020.
It’s Time to Look Ahead
CRE will always be developing, and it is important to keep new and emerging trends top of mind as lenders, investors, and consumers will be doing the same. For starters, those in the CRE industry can benefit greatly by working with a tried and trusted property advisor to better ensure they’ll be receiving the latest knowledge.
Knowing the true value of something is more important than ever and can be more difficult to discern — especially in today’s highly scrutinized regulatory environment. Luckily, at Valbridge Property Advisors, that’s our specialty. Clients across the U.S. benefit from our collective strength, with more than 675 staff in over 80 office locations, and our dedication to elevating appraisal industry standards for accuracy, integrity, reporting, technology, and data.
Though Valbridge professionals can’t tell the future, we’re always up to date on the newest and latest CRE trends. We’re trusted by clients to provide independent valuations and powerful insights for better business. Get in touch with us today to learn more.