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What To Expect In Commercial Real Estate In 2014

What to Expect in Commercial Real Estate in 2014

Building Engines is a Commercial Real Estate (CRE) Web and Mobile Property Management and Operations Software

Nearly every major real estate company has shared their predictions for the next 12 months, and after scouring the web, it turns out they are surprisingly positive – 2013’s year of recovery has spurred 2014’s year of optimism. The likely cause of this positive outlook? A stronger economy, which – as Cassidy Turley pointed out – “will bring higher earnings, lower unemployment, greater consumer spending and – for landlords – better rental rate growth and NOI.”

What else can we plan to see from the CRE industry? A few key expectations include:

  • A growth in office-using employment as the U.S. office market vacancy rate continues to decline to 14.3% by the end of 2014. In addition, CBRE forecasts that office rents will increase by 3%, on average, in 2014, and rise another 4.4% in 2015.
  • Occupiers will remain in good bargaining positions over the next two years and occupancy costs will increase in line with inflation, reports global property services firm DTZ. “They will continue to receive concessions as landlords compete to increase their properties’ net operating income,” DTZ predicts. “Occupiers will gravitate to the most affordable markets and continue to reduce their costs through more efficient internal space build-outs.”
  • Sustainability. “The focus on greening buildings slowed during the recession, but it’s gaining traction again,” says Randy Buddemeyer, President of Property Management Services, Newmark Grubb Knight Frank. “Many funds require sustainability as part of their investment criteria, so buildings with a path to get there or the capital to pull it off will reap the rewards.”
  • Having emerged from the global recession and its aftermath, the real estate private equity sector is finally positioned for growth in 2014, according to a global market trends outlook in real estate private equity published by Ernst & Young.
  • More buildings will adopt fully integrated software that merges property management, maintenance, and customer service interfaces, “making it easier to do our jobs,” says Steve Core, President, RiverRock Real Estate Group. “And technology is also encouraging tenants to look at open, collaborative workspaces,” he added.
  • Total retail investment is expected to increase upwards of 20% in 2014, according to Jones Lang LaSalle, as pent up demand that was not satisfied in 2013 fuels investments and investors look to balance their portfolios. The retail market will continue to turn around despite store closings and consolidation, CoStar Group notes.
  • An even bigger shift to mobile workforces, as it allows property managers and owners to work remotely and have continuous access to data and tools. “You don’t have to be tied to your desk anymore,” says Bill Grillo, Senior Managing Director & Principal, Cassidy Turley. He’s also watching for the ever-changing impact of technology and how it’ll affect operating expenses, Bisnow reported.
  • Transwestern says the lending environment is expected to bring more net-lease properties to market. As interest rates increase, a larger number of office, industrial and retail buildings are projected to be marketed for sale.

Read more prediction roundups from CoStar and Bisnow here and here, respectively.

Leeann Cannon

Building Engines Blog | Leeann Cannon

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