Editor’s Note: Welcome to the New Decade
While our vision for the new year is hardly as clear as 2020 would suggest it should be, the commercial and multifamily real estate industry enters this new decade with many fresh possibilities for security, efficiency and convenience.
While the vision of the new year is hardly as clear as 2020 would suggest it should be—not least because of the long-looming expectation of an economic downturn—the commercial and multifamily real estate industry enters this new decade with a reasonably solid set of fundamentals, a competitive array of financing options, and technological advances that promise many new possibilities for security, efficiency and convenience. All in all, not a bad position to be in.
Of course, there are challenges. Multifamily’s rising rents make it difficult for the middle class to afford housing, driving calls for regulatory action. Last year, that resulted in implementation of rent control in three states, with more considering it. Certainly, something needs to be done, given that demand promises to continue outpacing supply, while development still favors higher-end properties. But other public and private solutions are needed.
Meanwhile, yields on property purchases remain low due to intense competition among buyers for limited sales. Investors are looking to secondary and tertiary markets, but it’s hardly a new strategy. The Urban Land Institute predicted in its recently released Real Estate Economic Forecast that prices will moderate over the next three years, while returns will decrease this year (although the organization revised both predictions upward from its previous forecast). It certainly helps that interest rates remain low and capital is plentiful.
Also challenging is the shakeout among retailers in the face of overexpansion and growth of ecommerce that’s forced mall and shopping center owners to rethink their tenant bases. Their response, though, is indicative of the possibilities inherent in the new decade. Their creative thinking extends to entertainment, interactivity, medical services and education. Vacated big boxes are being reimagined and subdivided. Retailers that were once hidden in the back are now being featured, front and center.
Other emerging opportunities, a legacy of the ’teens, capitalize on technological advances and millennial preferences. The sharing economy is producing new options for housing, officing and traveling. They represent competition, but some property owners are finding ways to play a bigger role. Further exploration will be needed, as these concepts are not likely to go away anytime soon.
The Internet of Things also continues to evolve, offering a growing range of means to do more with less, measure with precision, increase security and control environmental conditions. Locks and intercoms, storage lockers and thermostats are already among the inventory, with an immeasurable number of possibilities to come.
As this new decade begins, we provide this Guide to 2020 as a means to take stock of the state of the market and evaluate coming trends. As always, we hope you find it both informative and enjoyable.