Friday, March 22nd, 2019 March22nd2019

Sell for More News: Commercial real estate trends to follow in 2019 (Part 2 of 3)

Published on March 22nd, 2019

Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.


(Part 2 of 3.  Click here if you missed Part 1.)

Investors Continue Flocking To Smaller Markets

Commercial real estate investors on the hunt for solid risk-adjusted returns continue to bypass gateway markets to bet on assets in secondary markets, and the trend is likely to continue in 2019.

Because of the high prices and limited opportunities in primary U.S. metro areas, investors are continuing to focus more on secondary markets, which are enjoying growth in investment activity and much stronger price increases than in the primary (largely coastal) metro markets. This behavior is typical in a late-stage cycle like we’re in.

However, those trends are likely to reverse if/when we see the economy slowdown at which point investors will seek the security of larger, more liquid markets.

U.S. Office Real Estate Markets To Remain Stable

The US office sector has experienced 10 consecutive years of positive absorption.

Coworking spaces will continue to open.

That said, we fear office demand will taper off in response to a slowdown in job creation and robust supply levels.  This may occur just as a significant volume of projects already under construction begin to enter the market. In which case vacancy will trend upward and rent growth will ease as market conditions become more competitive for landlords.

Retail Bankruptcies To Slow

The convergence of brick-and-mortar and online retail will continue to create major seismic shifts in the industry.

Though a wave of retailers recently filed for bankruptcy and shuttered stores — including Sears, Mattress Firm, Nine West and Claire’s — the circumstances surrounding most store closures in 2019 should be different.

We think the general industry sentiment is that 2017 was probably the peak year for retail closures.  We think there will continue to be closures in 2019 — it’s hard to say whether we’ll have more or less — but we would say a lot of the closures that we’ll see in 2019 will be more about what we call “portfolio optimization” than they are about retailers that are failing.

Multistory Warehouse Development In The U.S. To Accelerate

Conditions have ripened for multistory warehouse development in the U.S., and this trend will continue into 2019.

Facilities are underway or have already delivered in Seattle, San Francisco, New York, Miami and Chicago. While multistory warehouses are nothing new in Europe and Asia, the U.S. is in the beginning stages of developing these types of facilities now that building costs are no longer as cheap and there is less available land than in the past.  Unprecedented demand for warehouse and logistics space today has changed that dynamic.

The rents that are being achieved in these multistory industrial facilities could be two or three times what you’re seeing in traditional industrial.

We think this particular trend is only at the beginning in the United States.


Check back next week to see the final batch of trends to follow.


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About Beau Beach, CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Prowess IRES which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 414.324.4938, 615.603.9770, click to schedule a call or