by Dan Rafter
A new year is on the way, and it’s time for an end-of-the-year list. Here are five commercial real estate trends for which brokers, developers and investors should be thankful as 2015 draws to a close.
Let’s hope these five trends continue into 2016.
The Fed finally raised interest rates: OK, so this is more of a single event, but let’s hope it starts a trend. Yes, there are worries that increased interest rates could cause still-wary consumers to cut down on their spending. But what’s more important is what spurred the Fed to finally raise rates: a stronger economy.
The Fed would never have raised rates if it didn’t believe in the underlying strength of the economy. A national economy that is humming along is far more important to the fortunes of CRE professionals than is historically low interest rates.
The continued resurgence of once-struggling downtowns: Young adults — and many older ones, too — increasingly want to live in urban downtowns today. That’s been good news for Midwest cities that were once struggling to inject life back into their urban centers.
Today, downtown centers across the Midwest are buzzing with activity as developers build new multifamily residences, retail centers and office buildings.
The downtown boom has been especially impressive in Cleveland and Detroit, two Midwest cities that not too long ago were battling with downtown centers that resembled ghost towns.
A falling unemployment rate: As of November, the national unemployment rate had fallen to 5 percent, exactly where it was in November of 2005. A lower unemployment rate, of course, is good for the commercial real estate industry: Consumers are more willing to spend when unemployment is low, and that creates a positive ripple throughout the entire CRE business.
There is still a ways to go when it comes to unemployment. But hiring trends are heading in the right direction.
The continued multifamily boom: Plenty of consumers are choosing to rent because they want to, not because they can’t afford to buy a single-family home. This has inspired developers to continue to unveil plans across the Midwest for new multifamily developments. These new apartment communities, in turn, have helped spur activity in urban and suburban areas across the Midwest.
Yes, there are some legitimate worries that developers might be adding too many apartment buildings to some markets. But in most markets, demand is still outpacing supply when it comes to new, modern apartment buildings.
The industrial market is hot enough for spec construction: Across the Midwest — and especially in markets like Louisville, Indianapolis and Chicago — the industrial market is so hot, developers are ever more frequently building spec warehouse and distribution facilities.
As 2015 comes to an end, the industrial market ranks second in terms of activity to the multifamily sector. And this looks like one trend that will only grow in strength as 2016 begins.