Are you in commercial real estate and want to know where your next investment should be? Here are 7 real estate markets to keep an eye on.
Commercial real estate can be a worthwhile investment if you've done your research. And by "research" we mean that you understand what drives a strong commercial real estate market, and which factors may indicate long-term growth potential.
After all, no one wants to invest in a bubble, and no one wants to put their capital into a mediocre investment.
Below we've outlined 7 commercial real estate markets to keep an eye on.
Before We Get Started: What Drives a Strong Commercial Real Estate Market?
Economics is king! In any market, what drives strong real estate can be boiled down to one key thing: demand.
In the case of commercial real estate, this means that businesses demand space to grow and run their businesses. "Commercial real estate" includes real estate such as retail stores, corporate office space, manufacturing/industrial space, hotels, and apartment complexes.
So what factors indicate high demand? Low unemployment rates, for one: this means that consumers are making and spending money. It also means that businesses are hiring and retaining their people (i.e. they aren't shedding human capital.) And this bodes well for near-term prognosis.
Also, keep an eye on rising rent rates in commercial space: this means that demand for space is high and that businesses have the funds to pay the rising rates. Remember what you learned on Day One in college microeconomics: if businesses can't pay for something, they stop buying it. And if they stop buying it, their suppliers reduce the cost.
And if they stop buying it, their suppliers reduce the cost. There's always a tipping point. (As an added bonus, rising apartment rent rates often mean that the market has an inflow of new residents since transplants often seek temporary housing.)
And remember, commercial real estate is not a stagnant industry. On the contrary: it's evolving. Things like virtual reality and 3D renderings are changing the way things have always been done.
1. Keep an Eye On California
Should this surprise anyone? It's California dreamin' at it's finest...
Silicon Valley is hot, obviously: think San Jose, San Francisco, and Oakland. Tech companies and start-ups continue to move into and expand in the area, and office space rent prices are at an all-time high.
Retail rent prices are more than $46 per square foot in San Francisco, and Oakland experienced a year-over-year retail rent price growth rate of more than 12%. Those are some of the strongest metrics in the nation.
So-Cal (Southern California) is looking pretty bright, too: think San Diego and Orange County. In fact, San Diego is so promising that recently, a handful of real estate investment firms set up shop so they could keep an eye on things. And in Orange County, retail space is particularly strong: it's a popular destination for affluent tourists and So-Cal residents.
2. On the Other Coast: Florida
What is it about sunshine that makes a place desirable?
Miami and Palm Beach, Florida are both strong commercial real estate markets that you want to keep an eye on. Miami's retail square footage is nearly $33 per square foot and experienced nearly a 9% price increase year-over-year. And in terms of price increase, Palm Beach isn't far behind.
One word of warning about Miami, though: unemployment rates are hovering around 6%. Something to keep an eye on as you consider your ideal investment market.
3.The Big Apple
Let's face it: every business, whether long-standing or start-up, wants a 212 area code. New York City is arguably the hottest city in North America, and a major player in the financial and investment markets.
And with the city built on an island, there's not a whole lot of room to grow, except up. This has resulted in rising office space rent prices for many, many decades. Retail rent space is more than $34 per square foot, the second highest in the United States (behind only San Francisco).
4. Everything is Bigger in Texas
San Antonio is the biggest tourist destination in the state, and that means strong retail and hotel growth. It's also a popular living destination and has experienced a recent influx of new resides. That means jobs, disposable income, and demand for temporary (i.e. apartment) housing.
Austin is one to keep an eye on, too. Thousands of millennials are flocking to this city, and in one recent study it was ranked highest population growth in the US. Office space rent prices are proving the point, too: they increased more than 8% from 2015 to 2016. Also worth noting: unemployment rates are some of the lowest in the country.
5. Everyone Likes a Little Southern Flair
Charlotte, North Carolina is a bit like old faithful: it's always steady. For one, it's a desirable area for families. This means that plenty of retail businesses are going strong in order to meet consumer demands.
Charleston, South Carolina is another one to keep your eye on: retail rent price increased more than 8% from 2015 to 2016. Office space rent prices stayed pretty steady.
6. Sleepless in Seattle
Seattle has had very strong job growth in recent years, and is even considered by many to be the "new" Silicon Valley. Loads of tech and start-up firms are moving into the Seattle area (and Portland) and the area is considered very trendy by millennials. This means more restaurants, more apartment complexes, and more retail. After all, there's no better way for a Seattle resident to spend their rainy days than dining and shopping....
7. The Mountains are Calling
We wrap up our list of commercial real estate markets to keep an eye on with...you guessed it, Denver.
Denver has made an effort to re-vamp many of it's popular districts including the Union Station area and River North ("RiNo"). Its metro area is popular but, even more noteworthy than this, is the number of expanding suburbs. Thousands of people move to Denver every year due to jobs and the central location (and international airport.)
You can't go wrong putting your capital into any of the markets we've highlighted above. For your own real estate investment needs - including 3D visualization, marketing, or development - give us a call. We're here to help.