My, my, my…2015 was a breathtaking year for all things commercial real estate.
Just as Kylie and Kendall Jenner emerged from the shadows of their more famous siblings, so too did the commercial real estate industry.
Sound like a bit of a stretch?
Not when you consider the tremendous impact millennials will have on the commercial real estate trends that will dominate 2016.
The coming year will see the blooming of CREtech, a cultural shift to sustainability and the advent of CRE as a fourth asset class.
These long lasting commercial real estate trends will change the way we live, work and most importantly, the way we interact socially.
1. OFFICE SPACE DISRUPTED
The “Open Concept” office trend is certainly not a new one, but 2016 will take office lifestyle amenities to a whole new level.
“When the office is an enjoyable place to be, productivity increases and absenteeism declines,” says Nell Gable of office space finder Pivot Desk. And she is certainly not kidding.
From lounges and gourmet food to plenty of outdoor gathering spaces, 2016 office space trends will be sure to satisfy.
Didn’t take commercial real estate crowdfunding seriously in 2015?
The crew at Shark Tank probably wishes they had.
With the growth of crowdfunding websites like RealtyShares and Realty Mogul (who recently closed the largest crowdfunding loan ever), you can expect the CRE crowdfunding trend to heat up in the year ahead.
3. SMART BUILDINGS
Gartner, Inc. says commercial smart buildings will be the highest users of IoT in 2016, with smart cities using over 1.6 billion connected things.
“The difference between a smart building and a not-so-smart building is the value it provides to its environment,” said Smart Building Expert, Ryan Dennis.
4. 3D MODELING
Imagine standing on the 40th floor of a Los Angeles skyscraper that is yet to be built.
Well now you can. 3D modeling and 3D commercial real estate virtual tours will become a serious game changer in 2016.
Companies like Floored, led by David Eisenberg, are making shopping for prospective tenants or even applying for hotel construction financing that much easier.
5. WALKABLE MIXED-USE
Both millennials and boomers alike want living/working areas with “authenticity” and a “buzz”.
These demographic groups want “community, connection and an urbane village feel. Social media doesn’t do it,” says design expert, Paula Rees.
Flexibility, strong demand for multifamily rental properties and the newest trend toward redevelopment (old is new) make mixed-use an exciting commercial real estate trend that will dominate 2016.
6. DESIGN WILL DAZZLE
In 2016, commercial design + construction will focus on connecting us to natural elements.
This trend will blur the lines between interior and exterior spaces.
Interiors will breathe to life with vegetation, dreamlike dynamic spaces and a greater sense of community. While Exteriors will shine through illumination, distinctive visual identities and dazzling LED effects.
7. BROKERAGE BINGE BUYING
Record property sales activity and record commercial property prices have left industry giants like CBRE and JLL flush with cash (and they are quite happy to spend it.)
2015 saw the $2 billion mega-merger of Cushman & Wakefield and DTZ and the torrid pace of CRE spending doesn’t appear to be letting up any time soon.
“It’s like when the house next to you sells for ‘X,’ you look at your wife and say we could get ‘X’ or better,” said JMP’s Mitch Germain.
8. The 4TH ASSET CLASS
Move aside stocks, bonds and cash, there’s a new sheriff in town: Commercial Real Estate is now the 4th asset class.
2016 looks to be the year when commercial real estate hits the magical institutional investor allocation threshold of 10%.
It’s been a long time coming, but a combination of low rates, new capital sources, more transparency and CREtech innovation has opened CRE to a broader spectrum of investors.
9. CAP RATE DECOMPRESSION
The Federal Reserve raised rates for the first time in 7 years but experts still feel good about the robust strength in commercial real estate values.
A recent survey by the ULI Center for Capital Markets and Real Estate predicts rising asset values along with rising cap rates, from 5.2% to 5.3% in 2016.
Demographics for apartment and office markets also remain compelling for 2016, with strong demand from baby boomers and millennials.
I know what your thinking: “What is Blockchain and how on earth will it effect commercial real estate?”
From title searches to commercial property lease price comparisons, Blockchain is the open data approach that many CRE pro’s have long waited for.
“The speed to transact will be shortened from days/weeks/months to minutes or seconds” said Jason Ray of ULI.
Wow! Good luck keeping up with all of that.
These 10 dominating CRE trends offer you just a taste what is to come for commercial real estate in 2016.
Have a few we might have missed?
Let us know in the comments below: