The commercial real estate market has been firing on all cylinders for over 10 years, and 2019 was a record-setting year. But will 2020 offer investors the same opportunities?
To help answer that question, CrediFi has created a list of 10 CRE and finance trends that mattered a lot in 2019. To hear what will keep shaping our industry in 2020 and beyond, stay tuned for our early January release of Financing Trends that will matter in 2020:
1. Lending Activity Remains Robust
All four major categories in the lending markets increased their holdings in Q2 2019, according to a recent press release by the Mortgage Bankers Association. Commercial banks, GSEs, life insurance companies, and CMBS (including CDO and ABS issues) hold nearly $3.5 trillion in commercial and multifamily mortgage debt. In Q2, agency and GSE portfolios reported the largest increase in mortgage debt holdings at 2.3%, followed by commercial banks and alternative lenders such as life insurance companies.
2. Senior Housing Is Growing in Importance
Death and taxes may be the only two things that are certain in life. As Baby Boomers continue to age and Millennials eventually take their place in life, the benefits of senior housing investment continue to grow.
3. Medical Office Buildings Attract More Institutional Investment
Earlier this month, CBRE reported that steady market fundamentals in the medical office building sector are supporting thriving investor demand. Although rent growth has slowed slightly, vacancy remains at 10-year lows and pricing remains strong due to the long-term demand for medical office space created by the aging demographic in the U.S.
4. Coworking Gets A Reality Check
While the WeWork implosion may have increased risk for some CMBS holders and office building owners, the future looks bright for shared office space providers. As the CCIM Institute reports, coworking space is diversifying among many CRE asset classes, including shopping centers, restaurants, industrial parks, and mass transit travel hubs.
5. Green Buildings are Thriving
Green, energy-efficient commercial property offers cost savings along with operational and social benefits to both tenants and investors. In fact, over 55% of the large office buildings in top markets such as Chicago, San Francisco, and Los Angeles are certified as green.
6. Tech Industry Drives Office Leasing
The percentage of office leasing driven by the tech sector has nearly doubled over the last 10 years. Today, tech-driven leasing deals account for 21% of major office leases in the biggest tech markets in the U.S. and Canada. Technology companies have helped to drive double-digit rent growth while creating over 1.4 million jobs, according to 2019 Tech-30 from CBRE.
7. Tech-Driven Tenant Experience Is Key
Building owners and property managers are also using technology to improve the tenant experience and boost operational efficiencies. Data control and analysis, artificial intelligence (AI), and cybersecurity are three ways investors are putting the end-user experience at the center of CRE investment.
8. CRE Values Rise With Public Transit
Commercial and multifamily real estate located within half a mile of public transit services have seen median per square foot sales prices increase by over 40% in some major metro areas with public transit. The American Public Transportation Association and NAR report that both businesses and consumers experience significant savings and benefits the closer they are to mass transit.
9. CMBS Gains Creativity
Commercial mortgage-backed securities continue to play a small, but meaningful, role in commercial and multifamily financing. According to the Mortgage Bankers Association, CMBS lenders are adding to the capital markets and diversifying system risk by creating investments with customized risk/return characteristics.
10. Disruption Means Focusing On The Fundamentals
Silicon Valley companies like us to believe that they created the concept of “disruption”. But at the end of the day disruption simply means doing the same thing better, in new and different ways. In the firm’s “2020 Banking and Capital Markets Outlook” report, Deloitte notes that the use of technology is creating significant changes for how business works along with endless opportunities.
CrediFi’s proprietary database of balance-sheet and securitized loans, owner contact information, and the activity of 10,000 lenders across the country offer CRE practitioners the opportunity to stay one step ahead of the competition.