We’re already in the second month of 2018. Time is flying! Now is a good time to give an overlook of the commercial real estate forecast in 2018. Just like the year before, there’s a lot of political and economic uncertainty. Right now, the United States’ economy is showing signs of growth with low inflation; accountants are trying to figure out the implications of the changes to the tax laws. There’s a lot going on!
For this article, we wanted to share some 2018 commercial real estate trends to watch.
7 Commercial Real Estate Trends to Watch
- Interest rates – With a new Federal Reserve chairman, there is uncertainty if the Reserve will continue to raise interest rates. If inflation accelerates, hikes in rates may occur. If these rates don’t rise, the benefit for the commercial real estate industry is that the cost of borrowing and value of properties should stay stable.
- Retail/Industrial – Retail did not do well in 2017. According to Fung Global Retail and Technology, 7,000 store closings occurred. Bankruptcies increased, as well. Cushman & Wakefield, a commercial real estate firm, predict the number of U.S. store closings will jump to 33% in 201, and that 25 major retailers could file for bankruptcy. Gap, Banana Republic and J. Crew plan to close stores in 2018. And as you may have seen, Walmart shut down 63 Sam’s Club locations already this year.
- E-commerce – As e-commerce continues to grow, commercial real estate is shifting from stores to warehouses and distribution centers.
- Foreign lending – The changes of U.S. tax laws could have a negative impact on American and foreign banks that do business in the states and internationally. Many large international companies have said they expect the new tax rules to cost them billions in the final quarter of 2017. The year 2018 will also be when Europe and Britain deal with the post-Brexit trade deal in March. If a deal isn’t signed by October, the U.K. will become a “third country” in March 2019 and not party of the European Union. Lenders, such as HSBC, Barclays, Deutsche Bank, who help finance U.S. commercial real estate are exposed to the Brexit fallout.
- Industrial segment – PricewaterhouseCoopers, Urban Land Institute and Colliers see the industrial segment to be the top property for 2018.
- Rents – According to the National Association of REALTORS, they believe rents will be “pretty much positive” across sectors. The company’s chief economist, Lawrence Yun, believes there will be a modest price correction in big cities but only a 3 to 7 percent drop in 2018.
- Unit Sales – Yun predicts a 5 to 10 percent decline in unit sales, because sellers and landlords will demand higher prices/rents (cause of a better economy), but buyers may end up seeing higher interest rates and won’t meet the seller’s demand.
Looking for Commercial Real Estate in Louisville?
Whether you’re looking to purchase retail space or land, our team at HOWE Commercial Real Estate can help you through the process. We provide brokerage, real estate development and consulting services across all market segments for commercial real estate in Louisville. Your needs are our priority. To get started with us, contact us or call 502-890-4475.