Market Spotting: New Opportunities for Commercial Real Estate Investing

Market Spotting: New Opportunities for Commercial Real Estate Investing

Now that the new year has arrived it is time to turn our attention to the commercial real estate industry’s most promising projects across the country’s major metro markets. These opportunities are quite dynamic and will continue to change and evolve as we march through 2016.

So far, the new year is bringing so-called “18-hour cities”. These are secondary and even third-tier cities that have reached tipping points of sorts. Such cities have quickly become trendy places to live and establish commercial enterprises. Investors are flocking to 18-hour cities, fueling their rapid growth by spending on commercial developments and home-building opportunities.

The recently published “Emerging Trends in Real Estate 2016” clued readers into some significant findings that provide valuable insight for what might come in the new year. This publication is a yearly overview performed by the Urban land Institute of studies and PwC. It analyzes the opinions and observations of thousands of real estate professionals regarding the state of the industry. The piece shows that optimism within the industry has increased, capital flows are healthy, offices now represent meaningful barometers of change and housing options are quite diverse.

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Yet the most intriguing commercial real estate dynamic that has emerged in early 2016 is that of the “hot markets”. All sorts of new cities are blossoming into real estate hotbeds. Industry sentiment in the “Emerging Trends” piece shows that a new city has been placed in the top position for the 2016. Last year’s top market fell all the way to number 30 overall. An array of markets made their debut in the top 20 this year. Perhaps most shocking is the fact that the markets that have traditionally placed in the top five to ten spots have fallen to lower positions.

Those polled and interviewed for the “Emerging Trends” piece have taken note of a number of key factors that will likely make significant impacts on real estate markets of all sizes in 2016. Some factors will have a positive influence while others are poised to cause negative ramifications.

Let’s take a look at the feedback.

Keep an Eye on the “Villes”

The latter part of 2015 and the early part of 2016 show a steady increase in rapidly growing markets like Louisville, Ky; Gainesville, Fla; Knoxville, Tenn and Jacksonville, Fla. Buyers favor these markets and those with similar characteristics due to their fast growing demographics and their burgeoning economies. These markets are also hotbeds for growing industries that easily attract commercial real estate investing gurus, venture capitalists and other power players. Many of these cities also feature aggressive development plans to boot. Their urban centers are impressive and they enjoy solid in-migration, particularly amongst highly skilled workers. Add in the fact that the Villes offer excellent quality of life along with low corporate taxes and it is easy to see why they are poised for a successful 2016 and beyond.

Miami

Florida will continue its bounce-back in 2016. In particular, those who participated in the the “Emerging Trends” piece have specifically highlighted Miami. The city has reestablished itself as one of the top 20 markets for commercial real estate investing opportunities. Other emerging cities in Florida include Jacksonville, Tampa Bay, Orlando and cities across all of southwest Florida in general. Commercial real estate investing is expected to continue its recent uptick in the state thanks to its diverse economic opportunities and the return to a fluid housing market.

Atlanta

Atlanta will likely continue its incredible growth in 2016 thanks to its ability to attract businesses that are in search of a new home. Atlanta truly has become ground zero for corporate relocations. It’s a relatively affordable place to live. The city’s commercial real estate is surprisingly affordable considering its fast-growing population. “Emerging Markets” survey respondents also expressed optimism for other cities that have successfully attracted corporations in search of new homes. Examples of such corporate-friendly cities include Dallas, Forth Worth, Nashville and Portland, Oregon.

Anticipated Growth in the Housing Market

The general nationwide trend for 2016 is a slow single/multifamily housing space compared to general household growth. At the end of October 2015, the U.S. Census Bureau estimated that home ownership rates were beneath 64 percent, representing the lowest average in the history of the United States. It is widely expected that the millennial cohort will catalyze new housing growth as they begin to consider whether they will purchase their first homes. The baby boomer cohort will continue to downsize or retire to new homes. The “Emerging Trends” piece also points to another key component in the expected growth for new housing: There is a growing need for low-cost housing, especially in major metropolises like New York City.

Concern for Expensive Markets

“Emerging Trends” respondents overwhelmingly stated that investment performance in San Francisco, New York and similar markets has been substantial. However, many respondents questioned if it is still prudent to invest in these markets considering their exorbitant prices. They also questioned if the amount of time required to hold such an investment is worth tying up the capital. There is no doubt that international investors have poured money into these cities, scooping up highly coveted assets. This trend will likely continue in 2016 considering the fact that recent changes to tax laws will entice even more foreign investment in major U.S. markets. Still, it is possible that the top markets will continue to thrive in 2016. Yet some of these spaces might be priced at a level that pushes potential investors to perform extra research and analysis before taking the plunge.

The Top U.S. Markets to Watch in 2016

The top 10 U.S. markets to keep an eye on in 2016 are as follows: Dallas/Forth Worth, Austin (Texas), Charlotte (North Carolina), Seattle, Denver, San Francisco, Atlanta, Portland (Oregon), Nashville and Los Angeles. If you’d like to check out the top 75 markets to watch in the new year, download “Emerging Trends in Real Estate 2016”. This report projects commercial real estate investing opportunities in terms of general investment, home-building, specific property types, development and capital markets.

Click here to access a free commercial real estate investing toolkit ($797 value) for free. Start Now.

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