What’s in Store For CRE in 2019?

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With 2019 right around the corner, everyone is focused on what the commercial real estate industry will look like in the new year. Industrial performed well in 2018 and the office sector stayed steady. Most analysts believe industrial will continue to thrive due to the growing e-commerce industry. As for offices, technology will definitely play a factor in the success as well as the flexibility of the space and lease options.

Industrial

E-Commerce has played a major role in the industrial market for the past couple of years and it is not expected to slow down any time soon. As stated in Colliers 2019 State of The U.S. Market and Outlook Report, “About a third of post-Great Financial Crisis (GFC) demand for industrial space has been attributed to e-commerce, a trend expected to continue for several more years.” Not only are established companies looking for more space to house their product, they also want accessibility to major markets in a central hub. Locations that have central access to areas by multiple modes of transportation only increase the chances of being able to offer faster shipping times.

Chicago, among other major markets, is one to keep an eye on over the next few years for continued growth in industrial real estate. There is currently 268 million square feet of industrial projects underway. Chicago, Atlanta, Dallas-Fort Worth, and Southern California’s Inland Empire account for a quarter of that development (Colliers).

Office

Millennials are flooding the workforce and companies are attempting to revolutionize themselves to stay in the game. In order to do so, businesses are now looking for flexibility with their options. People must find a new approach to the market this year, with co-working spaces, amenity seeking companies, and startups. Staying ahead of the curve will play a key role in the successes and failures of 2019.

The cost to rent an office in downtown Chicago is an average of $25/SF. Co-working spaces provide desired locations without the major costs of renting out an entire office in downtown Chicago. These spaces also offer the flexibility of not being tied down to one location for a long period of time like standard leases provide.

To compete with the market, offices need attractive amenities and flexible lease terms. These adjustments would result in a positive outcome for the office sector.

Although the experts do not expect 2019 to do as well as 2018, we look forward to the successes in the year ahead!

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