Owners of commercial rental property may soon see the positive rent growth and demand that residential rental properties have been seeing for several years. According to the ULI real estate economic forecast the U.S. economic outlook for 2018 through 2019 that is “extremely strong”. According to the forecast, the outlook beyond 2018 is good for both the economy and commercial real estate. Also, the report indicates commercial property rents are expected to continue to grow in all sectors, and occupancy conditions will stay stable.
The report also indicated that compared to six months ago, the forecast for the industrial sector is a lot more positive while the outlook for the apartment, retail, and office sector is unchanged or less optimistic. The growth of the industrial sectors is heavy to do economic based variables driving growth for industrial, commercial space.
The report also shows the overall vacancy rate for industrial rental property is expected to stay at about 7.4% of supply and may move higher to 7.5% in 2017 and 7.7% in 2020. Also, rent is expected to grow 4.6% is 2018, 3.8% in 2019 and 3% in 2020. According to the report, retail rental properties are still having challenges with vacancies even though vacancies have declined from 12.8% in 2011 to 9.6% in 2017. However, the ULI report forecasts that vacancies in the retail rental market may rise to 10% by 2020.
The report also indicated that discount retailers and well-located malls are doing well. Of note apartment, rental growth was negative in 2017 for the first time in 8 years. However, apartment rent is forecasted to increase over the next three years by 1.5% in 2018, 2.0% in 2019 and 2020.
Commercial landlords and property managers need to be ready to take advantage of the strengthening economies positive impact on their properties rents growth and vacancy rate. It is more important than ever to make sure their rental property system is up to date and efficient.
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Disclaimer: The information provided in this post not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.