Commercial Real Estate refers to any non-residential property that is used for the purpose of earning profit. It can be in the form of Office Markets, Industrial Markets, Retail Markets, Stores, Mall and Multifamily Markets. In spite of being one of the oldest industries in the US, the Commercial Real Estate Industry is the one that has been virtually overlooked and has lagged behind in innovation especially when it comes to adopting and advancing technology compared to residential loans.
The Commercial Real Estate Industry is on the path of recovery and the following are the five reasons why it is a hotbed of Entrepreneurship in 2016:
- Stronger Labor market and Increase in household formation: According to the Commercial Real Estate Forecast of the National Association of Realtors, there should be a gradual increase in the demand for Commercial real Estate Sector because of the attributes like the Stronger Labor Market and Increase in the household formation. As long as the jobs are added at a reasonable pace, there will be a gradual increase in demand for the commercial Spaces.
- The Sheer Size of the Commercial Real Estate Industry: This is another major reason why this industry is a hotbed of Entrepreneurship in 2016. The sheer size of the Industry puts it in a strong position to develop and grow as the economy continues to stabilize. However, increased investment and innovation in technology is crucial to continue this forward progression.
- The Improvement in the Process Management: When we talk about the Commercial Real Estate development, the real challenge lies with finding the right vendors to complete the projects along with keeping them on the right track. The improved process management has led to an increase in the efficiency of this sector by connecting the estate developers and owners with vetted vendors, contractors and architects. This will enable the businesses to choose better option based on past performance records, reviews, availability and price. Thus there will be a better insight in order to make better decisions with streamlined solutions.
- Information Segregation and Sharing: Information Segregation and Sharing is perhaps the backbone of this industry. The real estate data is most of the times either hard to locate or hard to compile or is not at all available. With the recent trends of aggregating and sharing the real estate information, there has been an ease in collaborating on the deals in real time. Having an access to the information has not only helped the developers, brokers and the clients but has also been helpful in improving the commercial leasing workflow to the landlords and brokers with the availability of all such information.
- Expected Drop in the Vacancy Rate: Any Vacancy rate that is below 5 % is generally considered a landlord’s market. A decrease in the Vacancy rate thereby states a rapid decrease in the currently occupied space thus, more demand justifying higher rent. The National Association of Realtors has forecast a decline in the Commercial Real Estate’s Vacancy rate in 2016. In its Commercial Real Estate Forecast, the NAR forecast the Vacancy rate to decline in all kinds of Commercial Estate properties whether Office markets, Industrial Markets, Retail markets or the Multifamily Markets. As the vacancy rate decreases, the need for more construction arises. Thus, providing enough room for development & growth across the industry.