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CRE Forecast: Hotels with a chance of apartment buildings

It's January already, and that means we can start figuring out if economists' and commercial real estate experts' predictions for 2014 were accurate. While we aren't far into January, we can at least start thinking about all the forecasts, especially while the weather here is so wintry.

At an economic outlook forum hosted by the Maryland Bankers Association in mid-December, economists said that commercial real estate will take off this year. Projects that have been in the planning stages will finally break ground, one speaker predicted. He backed up his claims with data from the U.S. Census Bureau.

For example, commercial construction spending nationwide increased 17.4 percent from November 2012 to November 2013. Office construction spending increased by 5.6 percent during the same period, while manufacturing construction spending grew by 14.4 percent. All of the numbers are in keeping with expectations for general economic growth during 2014.

Another economist at the forum agreed. She added that hotel construction in Maryland will increase this year. Both business travel and tourism should pick up as the economy improves, and that will increase demand for hotel rooms.

In addition to hotels, she predicted strong demand for apartment buildings would continue in 2014, though the rate of growth will slow. Still, the hotel and apartment sectors will fare better than retail and office.

The fly in the ointment could be the increase in the minimum wage. Construction companies may see a rise in costs that they will, in turn, pass on to developers. If the developers are unprepared, the higher cost of labor could result in project cutbacks or cancelations.

Our own prediction is a little less bold: Whatever happens, 2014 will be an interesting year for commercial real estate.


Baltimore Business Journal, "Baltimore's economy in 2014? Think commercial real estate boom," Gary Haber, Jan. 3, 2014

The American Surveyor, "Nonresidential Construction Spending Returns to Normal After Government Shutdown," Jan. 2, 2014

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