Growth in several key industries is helping the commercial real estate market bounce back quickly, but the additional activity could make it difficult for buyers to secure the properties they want.
Investors Business Daily reports that the technology and energy sectors are providing fuel for commercial real estate development in cities across the country. Well-known tech centers like Seattle and San Jose are seeing some of the fastest growth rates in the nation, while Austin, Manhattan and Los Angeles are also proving attractive areas in which to invest.
The interest in commercial buildings extends beyond the need for offices for fast-growing startups. Online retailers are requiring more regional distribution centers that will help them meet demand. Ecommerce shoppers desire faster and more affordable shipping, and having multiple warehouses across the country allows firms to shorten delivery times.
“They need a lot of warehouses,” Marisha Clinton, capital markets research director at Jones Lang LaSalle, said of Amazon. “Ecommerce has benefited industrial property.”
Bidding wars lead to price increases
Metropolitan areas large and small are seeing increased activity. According to the source, national sales volume is expected to grow by 15 percent this year to reach $271 billion. However, the activity has also boosted competition for properties. The New York Times notes that low interest rates and low property values have made it a good time to buy, but the lack of available buildings has led to bidding wars.
Interested ownership groups need to act quickly if they hope to capitalize on current market conditions. Banks are still restricting the amount of funding they provide for real estate investments, as they remain cautious of the market. Owners with too much debt may have difficulty getting funding. High levels of activity make it difficult to predict market value as prices continue to rise. Having the ability to react to changing conditions could help owners get the buildings they want.
Technology is a key part of being able to manage purchases and sales. Interested parties can quickly calculate expenses and income using building management software. This will increase understanding of the various risks associated with a particular investment and help firms more strategically plan their purchases. The ability to monitor and track financial information is also a vital part of gaining approval for loans. Having printouts of projected revenue or expenses helps banks understand the risk to their investments. As prices change, this technology also lets firms adjust their purchasing strategies. Knowing what purchase price makes a building unprofitable helps buyers avoid poor investments.