Realtors say good things about commercial real estate
WASHINGTON – May 19, 2014 – Realtors® who specialize in commercial real estate expressed confidence and optimism in the market during a forum at the Realtor Party Convention & Trade Expo.
Despite a sluggish economy, commercial practitioners report improvements in the market – and they expect improvements to continue in the years to come.
Economists and research experts from leading real estate firms, including National Association of Realtors (NAR) Chief Economist Lawrence Yun, participated in a panel discussion on the major forces shaping commercial real estate markets. All panelists were confident that commercial markets are well on the road to recovery.
“Commercial real estate closely follows the economy, usually with an 18 to 24 month lag time,” said Yun. “Realtors from across the country are reporting increases in sales transaction volumes and income, which tells us that things are turning around. We have not reached pre-recession levels, but the recovery is happening; we are almost getting back to normal.”
While the first quarter of 2014 saw no growth in Gross Domestic Product, Yun predicts it’s a temporary setback.
“This was delayed economic activity,” he says. “What didn’t show up in the first quarter will show up in the second quarter.(However,) the economic monetary stimulus we are benefiting from now cannot continue forever, so expect to see a long-term, steady rise in interest rates in the coming years.”
Kevin J. Thorpe, chief economist for Cassidy Turley, expressed a similar positive view of the market. “We are becoming increasingly optimistic,” he said. “April was one of the strongest months for job growth that we’ve seen since the recession, and sales volume is up 11 percent from last year. The data is telling us that this year should be better than last year.”
Then panelists also discussed the future of commercial real estate in the suburbs. John Sikaitis, managing director for Local Markets and Office Research for JLL, talked about the changing dynamics for office space.
“Companies are moving away from the traditional office park,” he said. “In the next five to seven years, the large office buildings off the highway will be obsolete. If a property does not have the urban amenities preferred by young Millennials, including access to transit, shopping, restaurants, etc., then it is not going to survive without substantially reducing its rent.”
In line with a growing demand for urban amenities, companies are beginning to focus on the quality of space over size. “Since the great recession, large and small offices alike have changed the way they use real estate,” said Sikaitis. “Businesses are averaging less space per worker and beginning to focus on how their office space can contribute to the health and well-being of their employees.”
Features such as air sanitation, circadian rhythm lighting and layouts that promote movement and fitness are becoming commonplace in many office spaces, he said. “Cost is no longer the deciding factor for these tenants; employee retention and creating a healthy work life balance are at the core of these decisions.”
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