Real estate investments are all about following the right patterns that are currently trending. Following the current trends highly influence sthe real estate investors’ decision on exactly what type of investment property to invest in. Commercial real estate trends are changing every year, and 2017 is definitely the year to consider investing in commercial real estate for many reasons. Here are some commercial real estate trends to look out for:
Interest Rates
Commercial real estate is one of the most expensive types of investment properties to invest in. Investing in any type of real estate will be driven by the interest rates, and thus commercial real estate trends are influenced by the changes in the interest rates. The question is how interest rates are looking, and specifically, the commercial real estate trends in this regard, for 2017. The Federal Reserve announced that it will be raising interest rates by a quarter of a percentage point. This was at the end of 2016, going into 2017. Higher interest rates mean that fewer people will be able to afford investing in real estate properties by making them more unattainable. However, according to Forbes, higher interest rates can also be associated with a stronger economy, which equals a stronger real estate housing market.
Remember, when investing in commercial real estate, loans can cover up to 90 % of the purchase price; however, you should expect to put a down payment of at least 10 %. A down payment of 20% is usually encouraged for residential investment properties such as single family properties; however, because commercial real estate is much more expensive, investors may find it difficult to put down such a high percentage.
The Idea of Mixed Use Developments
A mixed use development is not a new concept, but it is definitely a real estate trend for 2017. Mixed use developments combine commercial, industrial, institutional, and cultural use real estate. Technological advancements and the need for new businesses and services have made mixed use developments a key concept in real estate investments. These investments are not your traditional investments, and include a mix of working, living, and leisure all in one. You can notice that mixed use development projects are everywhere: you can live in a nice apartment or condo, where there is shopping, food, and even work offices in the same building. As a real estate investor deciding to invest in commercial real estate for 2017, mixed use developments are a great idea and can attract tenants, office employees, and retail workers all at the same time. The cash flow for commercial real estate is positive, especially when an investor decides to rent out multiple mixed use commercial real estate properties to different tenants.The concept of mixed use developments is one of the hottest commercial real estate trends, because it teaches investors how to make money in real estate efficiently.
Related: What Are the Best Ways to Make Money in Commercial Real Estate for Rent?
Different Financial Legislation
With the changing political climate in the US following the election of a new president, new real estate legislation that affects commercial real estate trends could come into effect. For example, President Donald Trump has called for deregulation, and is working to end the Dodd-Frank Act, which basically allowed new government agencies to oversee different aspects of the banking system. This could mean many things for future real estate investors who decide to invest in commercial real estate properties. Currently, lenders are skeptical, and are still strict with their standards for commercial real estate loans.
Related: What Investors Need to Know About the New Commercial Real Estate Loan Standards
However, in the future, less regulation could mean easier access for investors and enhanced ability to get loans. Nevertheless, in the long term, this may lead to problems with banks and lenders causing another crisis in the US real estate market, which may change commercial real estate trends.
Slowing of Supplies for Commercial Real Estate
Lenders usually have strict regulations, but due to the new financial legislation, any addition to supplies will be limited. According to The National Real Estate Investor, additions to real estate supply will remain limited across the board, with growth only in a few sectors which include multi family properties, student and senior housing, and single-tenant industrial properties.
Rising Values
Although we have seen the real estate market go downhill in 2008, we are starting to see patterns of the real estate market rapidly improving, and becoming more of a seller’s market. This means that there has been an increase in property values across the board. Although this might make it more difficult for investors to invest in real estate, it is a positive development in the long run. Moreover, because of different financial legislation and less regulation, real estate investors will be given more opportunities when investing in commercial real estate, instead of having to go through many loopholes in order to invest. Higher property values and increases in property prices mean a positive cash flow for investors in the long term as one of the leading commercial real estate trends.
Job Growth
With the increase in employment, there has been more of a demand for commercial real estate, with the need for more work space and office buildings. It has been difficult to find vacant commercial real estate properties because there is such a high demand for them, and because the rent is always rising. This trend is expected to continue with the demand for commercial real estate properties remaining high, and their value only appreciating throughout the years. This is only one aspect of commercial real estate trends that will continue to get better with an advanced economy.
Related: Job Growth and Its Effects on the US Housing Market
There are many things to consider before deciding on investing in real estate. Looking at commercial real estate trends for 2017, we know that interest rates are higher, mixed use developments are becoming very popular, and more and more investors are deciding to invest in them. Different financial legislation is affecting the way investors decide to invest in commercial real estate properties, commercial real estate value properties are rising in 2017, and there is a substantial job growth for 2017. All of these commercial real estate trends will help investors decide where to start before owning an income property, as well as what the outcome will look like. To learn more about the current state of the US real estate market and the best investment opportunities in it, keep reading on Mashvisor.
