Despite a sluggish economy, commercial practitioners are not only reporting improvements in the market, but they expect improvements to continue in the years to come, according to Realtors who specialize in commercial real estate, during a forum at the Realtor Party Convention & Trade Expo in Washington, D.C.
Lawrence Yun, chief economist of the National Association of Realtors, says, ‘Commercial real estate closely follows the economy, usually with an 18- to 24-month lag time. Realtors from across the country are reporting increases in sales transaction volumes and income, which tells us that things are turning around. We have not reached pre-recession levels, but the recovery is happening; we are almost getting back to normal.’
While the first quarter of 2014 saw no growth in gross domestic product, Yun predicts it's a temporary setback. "This was delayed economic activity. What didn't show up in the first quarter will show up in the second quarter," he says. However, with the improving economy, consumers should expect to see interest rates rise. "The economic monetary stimulus we are benefiting from now cannot continue forever, so expect to see a long-term, steady rise in interest rates in the coming years."
John Sikaitis, managing director for local markets and office research for JLL, discussed the changing dynamics for office space in the U.S.
"Companies are moving away from the traditional office park," he says. "In the next five to seven years, the large office buildings off the highway will be obsolete. If a property does not have the urban amenities preferred by young millennials, including access to transit, shopping, restaurants, etc., then it is not going to survive without substantially reducing its rent."Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
In line with a growing demand for urban amenities, companies are beginning to focus on the quality of space over size. "Since the great recession, large and small offices alike have changed the way they use real estate," adds Sikaitis. "Businesses are averaging less space per worker and beginning to focus on how their office space can contribute to the health and well-being of their employees."
Features such as air sanitation, circadian rhythm lighting, and layouts that promote movement and fitness are becoming commonplace in many office spaces, he says. "Cost is no longer the deciding factor for these tenants; employee retention and creating a healthy work life balance are at the core of these decisions."