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Why 2015 Is Going to Be a Great Year for Commercial Real Estate

Written by Posted On Thursday, 30 April 2015 11:37
Source Source http://a10capital.com/

Coming out of the relatively recent problems and crises of the housing and commercial real estate markets has been a long time coming. But since those horrible years of 2007 and 2008, the real estate market is starting to grow again. Redfin stated that this February, home tours were up 50% from a year ago. Signed offers were up 27% from last year, meaning this is clearly good news for not only agents, but buyers and sellers as well.

 

Investors are beginning to unload, and people are starting to move around again. They are more comfortable in the job market as well as salaries. There are more office buildings, and larger housing developments being built in 2015. While there are many variables that will determine the course of US commercial real estate, some trends include increased allowances and capital flow, increased want for risks, investors continue to follow jobs and people, and continued low supply.

 

Markets in the major cities that are experiencing growth including San Francisco, Seattle, and Houston, are also improving and many investors are taking advantage of this. These cities are tied to technology as well as banking and energy, and employment growth is on the rise. San Francisco had job gains exceeding 4%, Houston has an enormous energy sector as well as exportation of machines, and Seattle has also had major growth due to major tech companies setting up large offices.

 

With increased allocations and funds we can expect more investment capital coming into commercial real estate, especially with the strong performance of the National Association of Real Estate Investment Trusts as well as the National Council of Real Estate Investment Fiduciaries.  One of the major problems that could occur though could be increased foreign and retail investor money to continue to push capital values up well beyond the 2007 peaks, which could be a major concern.

 

Now that markets are better, there is going to be an increased appetite for risk and taking chances. A major way to do this is by investing in housing and commercial real estate. In recent quarters, investors have been willing to accept markets that were well-priced or the Class A properties. For the Class B and C properties, there are even some investors who are risky enough to make strategic value plays in these lower markets. Although they may not be in the same Class as A, people are making risks to develop the secondary and tertiary markets all over the country.

 

Businesses are doing better than ever in the current market. Companies such as A10 Capital, who recently closed a major $13 million transaction of three Class B office buildings that they helped finance from an auction. Or a $27 million upgrade to Bush Tower skyscraper in New York being done by Tribeca Associates.  Both new constructions and the re-use of older buildings is happening and driving significant activity which benefits from lower interest rates and new investors entering the market after the 2007-2008 crash.

 

Overall, there is major growth happening not only in the job sectors, but in commercial real estate as well. Because if you think about it, companies need to have more real estate in order to set up offices for their employees to promote continued growth. With the success that is currently happening, companies and investors are more willing to take risks when it comes to real estate, hoping for a bit payout in the long run. 2015 is looking to be a great year for growth and commercial real estate, it’s just a matter of who is going to jump on that bandwagon.

 

 Office Building

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