Projected Commercial Real Estate Trends 2018

Posted on February 23, 2018

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As we move further into 2018 and the year continues to progress, slow and steady growth is expected in the commercial real estate market.

Industrial real estate is expected to remain a star performer in the market this year as investors flock to the sector’s strong fundamentals and record-breaking occupancy and rents.  Additionally, construction is booming as operators continue to tackle online delivery and push to get products to consumers more quickly by opening modern, multilevel distribution hubs in densely populated markets.

Office: U.S. office market growth should continue in 2018, but at a slower pace, due to higher completions and the tight labor market’s impact on tenant demand.

Industrial & Logistics: Although we are well along in the economic cycle, in the e-commerce/omnichannel cycle we are not, so demand for high-quality, well-located industrial real estate should not wane anytime soon. In most markets, a lack of quality space options is challenging those seeking to expand their supply chains.

Retail: Changing demographics, consumer expectations and omnichannel retailing will continue to reshape retail and its real estate environment in 2018. The consumer trend toward off-price and discount retail will continue, with mid-range retailers seeking new ways to limit share losses to lower-priced players.

Multifamily: Developers are poised to register the second-highest annual completions count of this cycle in 2018, down by 9.2% from 2017’s cycle peak. Because apartment starts began to slow in 2017, the multifamily market will get a reprieve from new supply by late 2018 and throughout 2019.

Hotel: Forecasts for continued U.S. economic expansion portend a favorable year ahead for the U.S. lodging industry, with forecasts of income and employment growth—coupled with slowing supply growth— promising increased demand for hotels.

Data Centers: The U.S. wholesale data center market continues to thrive, with sustained record-setting absorption levels for the past three years. Transformation and flexibility are the key themes in the multi-tenant data center space in 2018.

Life Sciences: The greater health care needs of an aging population and quickening advancement in software and computing power have prompted strong biotech employment growth, with demand surges in most major markets and double-digit rent growth in some. But with the unsustainable rise in health care costs, the industry is under pressure to identify new, more effective, less costly solutions.

Medical Office: The direction of health care policy and payment mechanisms may remain uncertain, but rapid growth in the older population will remain a significant tailwind for medical-office demand in the years ahead.

Seniors Housing: The seniors housing market improved modestly in 2017 and is set to improve further in 2018, largely due to lower construction levels. For the most part, the traditional segments of seniors housing—independent living, assisted living, memory care and nursing care—are not yet benefiting from baby boomer demand.