Compilation of Market Predictions by the Pros

[Tyler Kastelberg]

There is no shortage of opinions in real estate. In this post, we compile a number of expert opinions about future real estate trends in retail, multifamily, hotel, office, and industrial sectors.

Warehousing and Industrial Real Estate Are Expected to Outperform Driven by E-commerce

“More companies today are factoring their promise on fast delivery.” – NAIOP Commercial Real Estate Development Association

“The boom in e-commerce has created significant demand for new industrial space, often in markets based on population and Internet usage, rather than store replenishment.” – NAIOP Commercial Real Estate Development Association

“Staying ahead of—trends such as autonomous vehicles, predictive analytics, and robotics.” – An interviewee on the PWC 2019 Trends Report

E-commerce, “only made up 11% of the total industrial transactions signed in the past 12 months.” While Third Party Logistics make up, “29% of the total transactions signed.” – Colliers Industrial Market Outlook

Affordable Housing is Expected to Outperform Luxury Multifamily

“Access to affordable housing is fundamental to the health and well-being of Americans.” – MIT Center for Real Estate: Real Trends

The Urban Land Institute predicts the apartment housing vacancy rates and rental rates will rise into the next couple years but start to taper into 2020.

“All over the United States, the crisis of affordable housing is getting attention, and the nature of the two-by-four may differ from place to place, but it is unquestionably powerful.”1 – PwC 2019 Emerging Trends

Some cities have, “experienced faster inflation of construction costs than the U.S. average.” – MIT Center for Real Estate: Real Trends

Retail will need to re-invent itself

“Today’s world is characterized by newer, unproven brands, and by tenants who reinvent themselves every five years.” – PwC 2019 Emerging Trends

Retail landlords will begin to focus on "more experiential offerings such as restaurants and live entertainment." – Wells Fargo's Q2 CRE Chartbook.

“…short lease terms—the pop-up marketplace—is gaining traction in diverse markets including high-end properties.” – PwC 2019 Emerging Trends

“Shopping centers will experience major changes, with artisan and local-products merchants increasing their roles. Flexible programming of retail spaces will mean changing seasonal experiences and more experimentation.” – MIT Center for Real Estate: Real Trends

Luxury Multifamily Supply is Expected to Outpace Demand

“…the expense of developing properties and improving existing stock has gone up fast, to a level that now exceeds income gains among would-be renters.”

“Compared to six months ago, forecasts for both housing starts and existing house price growth is less optimistic for all three years of the forecast period.”

Business Travel and Is Expected to Drive Hospitality Demand

"Stronger economic growth has propelled business travel for company meetings and conventions." – Wells Fargo's Q2 CRE Chartbook

Occupancy rates for hotels, “are forecast to remain strong over the forecast years, at 66.1% in ’18 and ‘19 and 65.7% in ‘20.”– Urban Land Institute – 61.7% 20-year average occupancy

“Small- and medium-sized centers are planning to increase meeting room and pre-function space. They are also focusing on adding features that will enhance the attendee experience (e.g., charging stations, interactive video-boards, and social areas).” – PwC 2019 Emerging Trends

“The sharing economy (…) has increased access to information, and growing sophistication of the customer has made it harder to provide one-size-fits-all hotel concepts.” – MIT Center for Real Estate: Real Trends

Co-Working is Expected to Lead the Office Market

“The strength of the co-working market is not to be underestimated.” – PwC 2019 Emerging Trends

Offices are starting to reduce their footprint as, “A substantial amount of space in conventional office layouts is not used at any point in time: Meeting spaces are not always booked; workers take vacations and fall sick; 9-to-5 workspaces remain unoccupied after hours; and employees with assigned desks spend time off-site talking to clients or performing services.”- MIT Center for Real Estate: Real Trends

“Compared to 6 months ago, the forecast for office vacancy rates is unchanged for both ‘18 and ‘19, but less optimistic for ’20. The forecast for office rental rate growth is less optimistic for ‘18 and ’20.” – Urban Land Institute

“Some investors see CBD bid/ask spreads starting to tighten as sellers become more accepting of a moderation in pricing. Suburban investors point to attractive leverage spreads, particularly as compared with CBD properties.” – PwC 2019 Emerging Trends

“Success will elude those markets remaining passive or stubbornly applying 20th-century approaches—real estate expansion to ride economic growth—to 21st-century challenges.” – PwC 2019 Emerging Trends