Ringing in a new year is always synonymous with change for both individuals and businesses. The past year has seen interest rates fall, increased housing prices, a commercial real estate boom in spite of brick-and-mortar retail store closings across the country. While the year 2020 might bring some of the same, those looking to get into property development, small business ownership, or just buying a house, will want to know about the four trends primary trends that are projected to shape the real estate industry in the coming year.
The year 2019 continued to see retail location closing across the country, carrying on a trend that captured awareness in 2017. Landlords are experiencing increasing difficulty with keeping retail tenants in malls across the country, as there was a predicted 9,000 retail location expected close by the end of the 2019 calendar year. There were 5,524 closures in 218, with 8,139 closures that occurred in 2017. Although digital retailers are storing to open brick-and-mortar locations, it isn’t enough to balance out the loss of the other stores. Big box stores are unable to keep up with the move toward digital shopping, and closures are taking big chunks out of the landlord’s profits. The closure of stores like Sears, Payless, and J.C. Penny leave large vacancies that would take several smaller stores to fill. Mall owners have to shift their focus and offer more than just major retailers if they want their space to well-used and profitable. Diversifying mall offering to include restaurants, fitness gyms, or entertainment venues can help save landlords from financial loss.
Residential Real Estate
As the millennials continue to have a vested interest in the housing market, developers and real estate investors like Aubrey Ferrao will continue to benefit from both a focus on starter homes and luxury residences. The millennial generation has an interest in homes that are bigger and better than what their parents enjoyed as a starter home. With mortgage rates scheduled to continue dropping, more families and individuals will seek affordable starter homes. The economy has improved and unemployment rates have dropped, giving more people access to the funds needed to secure a home loan. With suburban developments like Aubrey Ferrao Fiddler’s Creek in high demand with millennials, real estate agents and property development companies need to figure out how to address the demands of a growing demographic without leaving the rest of the potential homeowner’s without options.
Legislation in many states is threating property developments and investors everywhere. In early 2019, Oregon passed a rent control bill that capped rent hikes at 7% a year. Two additional stated followed suit with several more working on legislation to enact a similar cap on rental rates. As a result, there is reduced investment potential for developers and property owners. This trend seems to be moving toward more national attention, as several of the presidential candidates for the Democratic party have mentioned a form of this subject along their campaign trails. In addition to thwarting an investor’s ability to recoup the investment in a purchase, or maintenance and upgrades, renters also find themselves facing a wider imbalance between supply and demand.
The average fixed-rate mortgage is just below 4%, with an all-time low of 3.3% hit during the year 2012. While the economy is holding its own in the U.S., there is some concern that growth at home and abroad might stall. Global growth is expected to its lowest level since the Great Recession. This may force the Federal Reserve to cut rates again in 2020, but this is speculation by only some of the economists.
Paying attention to these trends could open up real estate opportunities in the coming year. Whether you are looking to buy or sell, there is growth potential on the horizon.