Much like its residential counterpart, the commercial real estate market faced a pretty challenging year in 2023. Some say it was the most challenging ever.
Big picture, the industry as a whole is suffering and still feeling the hangover effects of the pandemic. According to some experts, office space vacancy rates are at a 30-year high at 18%. This, coupled with rising interest rates and a potential recession on the horizon, have all been working against the business side of real estate.
However, not all sectors of commercial real estate are scuffling. In fact, some are doing quite well, and poised to offer more growth in the coming year. Which is why RPR (Realtors Property Resource) is offering this 2024 commercial real estate forecast, and to offer some pointers about how using RPR Commercial can add value to your efforts as a commercial practitioner.
While many experts are expecting the residential market to bounce back a bit and improve across the board this spring, the commercial sector is a mix of optimistic growth and more of the same. Leading the more-of-the-same category (as in bad) is office space, which is predicted to be flat, or possibly worse.
As mentioned in the opening, office occupancy is historically low. The bottom line: people prefer working from home and corporations and businesses are trying their best to get them back to the office. But with unemployment low and individual productivity high or level, it’s a tough sell to employees and businesses have almost no leverage to put butts in office chairs.
Even hybrid schedules aren’t enough to justify massive office buildings, as owners and investors try to pivot and figure out what to do with all the empty space. Some are getting creative and turning empty work buildings into apartments, while some are simply razing structures altogether and rebuilding for the future with an eye on data centers and warehouses. Either way, the future of office space is still bleak.
On the flip side, here are some commercial segments that are primed for growth:
Brick and mortar rebound?
Even with e-commerce’s continued growth and most mega malls being half empty, there is some hope on the horizon for neighborhood-focused retail success. Densely populated urban and suburban areas (strip malls) are propping up the retail sector with growth and positive numbers.
With less new construction and therefore less competition, neighborhood and community shopping centers are showing strong vacancy rates and positive rent growth for the foreseeable future.
When it comes to these types of retail locations, RPR Commercial can be a great asset. The Site Selection tool offers commercial agents an edge when it comes to finding ideal areas for retail business sites. Here’s a top line of what it can do:
- Allows users to select specific attributes from broad data categories such as economic, demographic, spending, tapestry and more.
- With these attributes selected a user can search a large geography such as a county, and identify where these conditions exist in smaller geographies such as ZIP codes or neighborhoods.
- This drilling down allows a user to search for properties only in these geographies that have their desired attributes, ensuring that the core drivers of a client’s business are in the area.
For a strip mall focused site selection success story, check out RPR’s blog article Spot-on Site Selection is how the Cookie Crumbls.
Multi-family offers multi opportunities
Multi-family (apartments and condos) investment opportunities appear to be on the rise. That’s mostly attributable to rising mortgage rates from 2023 that have put homeownership beyond the reach of many families. Of course, housing shortages and a slowdown of new builds is also a factor.
And while that might not be optimal for residential and the middle class as a whole, it does create demand for multi-family units and those who have the capital to invest in them. In fact, multi-family is among the few commercial categories that are seeing rent growth and increasing property values.
When it comes to multi-family ROI research and number crunching, RPR is a great resource to tap into when you’re working with commercial investment clients. The tools available to you in RPR, especially its collaboration with Valuate®, can help you assess a commercial investment in multifamily dwellings or buildings.
Here’s how to apply RPR Commercial to your multi-family research: Multi-Family Prospecting in RPR Commercial.
No matter what area you specialize in when it comes to commercial real estate, RPR Commercial can help. This digital tool, offered by the National Association of REALTORS®, offers practitioners access to 850K+ listings and 56 million+ off-market properties, allowing you to search, research and do your homework on commercial properties throughout the country.
Plus, RPR offers indispensable, analytic tools such as Site Selection, Trade Area Reports, ROI and investment, and consumer segmentation demographics and data. As well as commercial comps, traffic counts and assessments, points of interest and climate risk assessment.
Log in to RPR Commercial today for a successful tomorrow… and rest of the year!