A really well-written article by the Urban Land Institute on some of the major commercial real estate trends in 2016.
This article was written by Peter Burley and David Lynn, two of the contributors to ULI’s textbook, The Investor’s Guide to Commercial Real Estate.
The U.S. property market landscape in 2016 will appear much like it did in 2015, with a number of interwoven aspects that bode well for savvy investors who can step out in front of ongoing—and, in some cases, intensifying—economic, demographic, and technological trends. On the economic side, the U.S. Federal Reserve made it clear in December that the central bank sees U.S. growth as relatively stable when the federal funds rate was notched higher by a quarter point. Nevertheless, underlying inflation is extremely tame (with worries of deflation in some sectors and economies) in the United States and major emerging markets, providing no impetus for significantly higher rates. That may put some pressure on other global economies, including the Eurozone and China, but will also make U.S. assets more attractive in the coming year.
Most economists agree that the U.S. employment situation will remain on its current trajectory, with unemployment falling below 5 percent early in the coming year, adding to demand for housing in a variety of forms, for office space, for the retail sector, and for industrial/distribution. Demographic shifts that have been underway will continue, as millennials find jobs, form their own households, and either buy or rent their first homes. Baby boomers will continue to retire at the current rate of about 10,000 per day and to downsize their homes and move either to walkable urban communities or into senior housing. Technology will continue to change the landscape in numerous ways—from the way people shop to the way they work to the way they interact with their surroundings. Some trends loom larger as one looks ahead. Inspired by our conversations among colleagues, including several members of the Counselors of Real Estate (who produce the widely read annual Top Ten Issues Affecting Real Estate), the following are six trends that we believe will play a significant role in commercial real estate in the upcoming year.
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