Bernstein & Feldman, P.A.

Providing Personal Counsel
And Representation For Over
30 Years

CRE market set for downslope

According to a forecast made by a UCLA economist in July 2016, the bull market that has characterized commercial real estate in Maryland and around the country for almost a decade is coming to an end. Although market segments like multifamily housing have grown since 2011, experts say that fewer tenants are willing to pay high monthly rental rates.

Consumer habits were cited as important factors in the CRE market. Around 20 percent of all department store mall anchors are predicted to close over the next few years. This is contrary to the fact that retail sales have been on the upswing overall, but analysts point to the idea that consumers are beginning to favor online shopping. This same trend may lead to improvements in the industrial CRE market as retailers transition to operating models that rely on warehouse spaces.

Outside the tech sector, office CRE markets may also experience declines. Companies are moving to open floor plans that minimize their space requirements. Notably, the office vacancy rates across the nation were only two percentage points lower in 2016 than they were at the beginning of the bull market. As more construction projects finish, general CRE supply is also likely to increase even though demand is tapering off.

CRE market trends unfold over long time frames. For those trying to close profitable transactions, it might be difficult to predict how such conditions could impact their investments in the years to come. Nonetheless, investors may be able to shore up their holdings by being careful about how they structure agreements and paying attention to factors like local zoning laws. Discussing these issues with an attorney might give investors insights into entering into arrangements that aren't as vulnerable to market fluctuations.

No Comments

Leave a comment
Comment Information