While we may already be a month into 2019, it’s never too late to plan your goals for the year ahead. In the end, planning goals is less about when you do them and more about how you do them.
Taking into consideration important factors is vital to the planning process. It’s important to note the potentially monumental factors that will influence where the industry is headed in the year to come.
The past year was promising for the commercial real estate sector and the economy as a whole, so looking ahead to what 2019 has in store, there is a lot of positive momentum to account for. From interest rates to technology, here are 5 things to consider when planning your 2019 commercial real estate goals.
Interest rates and governmental policy
Interest rates are expected to continue rising in the coming year. A number of factors may help to protect commercial real estate performance, including cap rate, spreads over the US 10-year Treasury yield, and the outlook for economic growth and real estate market fundamentals.
But at the end of the day, rates will surely have more impact on investment decisions. So, careful due diligence and policy monitoring are critical to ensuring proper investment planning.
The possibility of a slowing economy
In 2018, the commercial real estate sector was fueled by the strength of a booming economy. But is that economy starting to lose steam?
Most analysts believe that despite a slowdown, the economy will stay on course. Yet, some predict we’ll see a slowdown in 2019 due to continued short-term interest rate bumps, waning fiscal stimulus from federal tax cuts, and tariffs that could curtail growth in 2019.
The biggest thing to consider is how a slowdown could impact demand, absorption, cap rates, and overall real estate investment.
Technology’s impact on the way we work
Taking a look outside of economic factors, one of the most crucial elements to consider when examining your real estate outlook is technology.
Technology is penetrating the real estate industry in ever more powerful ways. Software like Stessa and are creating ways to unlock capacity and enhance productivity. From file management and payment requests to reporting and scheduling, these platforms allow professionals to streamline workflows and better serve their clients.
When it comes to planning for the year ahead, ask yourself how technology can better your productivity, efficiency, and your business.
We, as well as most industry experts, have talked at length about the impact of rising construction costs in the last 12 to 18 months. In fact, the topic was the number 1 real estate and development concern for respondents of ULI’s Emerging Trends in Real Estate 2019 survey.
Trade tensions/tariffs, price increases on almost all construction material segments, and the continuing labor shortage have all hit the construction sector like a ton of bricks.
It’ll take considerable planning, collaboration, and flexibility on the part of owners, tenants, developers, and contractors to find successful solutions.
The retail resurgence
The past couple of years have been challenging for retail, to say the least. But the surprising truth that real estate professionals should remember going forward is that we’re seeing a brick-and-mortar retail resurgence.
A report from global research and advisory firm IHL Group found that for every retailer closing stores in 2018, two are opening locations, resulting in net growth of over 2,000.
Retail sales—excluding automobiles, gas stations and restaurants—have grown year-over-year in all but one month since the beginning of 2010, according to the National Retail Federation.
The coming year has a tremendous amount of opportunity and optimism about where the commercial real estate sector and the economy are headed. These are just five of many important factors to consider as you plan for success and the ever-changing dynamics of the industry in 2019.