The Biggest Storylines for Every Major Commercial Real Estate Asset Class in 2017 (So Far)

Investing in commercial real estate without all the available information is a dangerous game. Each market has a story, each asset has a story… and each property type has its own market story.

What are the stories for the largest property types in 2017? While there are many, here’s an overview of some of the most talked-about and reported-on trends for each major asset type.

Retail

Nine retail bankruptcies in the first quarter, plus major store closures for many other brands highlighted the start of 2017 for the Retail sector. The bankruptcies are taking a toll on some shopping mall-backed CMBS, but mainly, they’re casting uncertainty over the long-term strategy of retail investors. Ecommerce is a force to be reckoned with, and both big box and specialty retail tenants are feeling its force, and pushing the industry into new and innovative strategies to hang onto revenue. If you’re a retail real estate investor, understanding the implications of Ecommerce, the types of retail plays affected more or less heavily, and having a decent view on where society’s shopping habits will be over the next several years is paramount to success.

Stay on top of retail’s latest casualties

• Retail bankruptcies march toward post-recession high (CNBC)
• Stores are closing at an epic pace (CNN Money)

Office

Coworking is the talk of the town in New York, and seemingly everywhere else increasingly. From WeWork landing huge investment dollars and a contract with IBM to manage an entire building for the single tenant, to a hundred more competitors emerging, coworking is a well-loved trend by many and ridiculed by some. Is coworking just big fad, like some stuffy naysayers proclaim? We wouldn’t bet on it.

Get in the know on coworking

• SoftBank Just Poured $300 Million into Shared-Office Startup WeWork (Fortune)
• WeWork Signs Landmark Deal with IBM For Full Manhattan Building (Business Insider)
• Industrious acquires PivotDesk and raises $25 million (VentureBeat)

Hotels

Let’s go for three “disruptive” trends in a row. Airbnb, an online platform for short-term apartment rentals, has put downward pressure on hotel earnings growth in many markets. New York’s hotel owners have actively lobbied for more restrictive rules and stronger enforcement on short-term apartment rentals, as the start-up now commands a market value of $30B after launching less than a decade ago.

Check-in on Airbnb’s effect on hospitality real estate

• The hotel industry prepares a national fight against Airbnb (6sqft)

Multifamily

Interest rates are finally starting to inch up after several years at historical lows. Or are they? It’s been a confusing time for interest rate watchers, including Multifamily investors and lenders. Large, stable financial markets thrive under certainty. We’re not getting a ton of certainty on rates and growth in the broader market right now, and while deals are getting done, this has become the story to watch.

Understand the effect of interest rates on Multifamily

• Uncertainty Weighs on Apartment Lending Sector (National Real Estate Investor)

Industrial

Remember what a force eCommerce presents in challenging cap rates for Retail? Light industrial has seen the opposite effect across many markets, as Amazon and other online retailers need warehousing and distribution centers to power their fast delivery promises.

Read more about Industrial’s growth

• Increasing E-Commerce Sales Continue to Drive Industrial Construction (National Real Estate Investor)

Honorable Mention Storylines

• Cannabis is also starting to get some more buzz for Industrial real estate implications, but we haven’t hit the “year of cannabis” yet — the market will feel it fuller force when we do. For those forward-thinking investors, it’s not a bad idea to get ahead of this one in preparation for this being the top light industrial trend in a subsequent year likely not far off. See Mapping Marijuana: CRE Tech Startup Focuses on Green Zones
• Self-driving cars are up on many investment radars, with implications like needing less parking around buildings, to where commuters will look to live when they don’t need to drive themselves, and how cities will be designed. See How Self-Driving Cars Will Change Local Real Estate
• President Trump really works his way into any newslist doesn’t he? Real estate? Trump. Politics? Definitely Trump. There are a few angles where the federal executive branch is being watched for the impact on the real estate community — but really, we’re probably just putting this item here for the SEO. See What Trump’s First 100 Days Tell Us About Foreign Investment in U.S. Real Estate

What storylines are you watching most closely for the real estate market in 2017? Share this article on social media with your opinion.