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2016 with all of its expected and unexpected things, ups and downs are gone and before one can notice, we are deep into 2017 with new expectations, challenges, plans, strategies and all of the presents the year brings.
Commercial Property Management industry does not change that much every year in general, but some things change, new trends are coming, thus in order to be efficient and successful this year, you need to be prepared for the year to come.
The Real Estate market was expected to be strong in 2015 and 2016, but there were projections that there is going to be recession in 2017-2018. Is it going to happen? Or maybe the year will be even stronger than previous ones?
So, let‘s overlook the trends that 2017 brings to commercial property management industry.
- Economy and the real estate market: 2017 will be better than 2016
Many economic indicators, like fluctuations in interest rates, inflation, job-market growth, GPD and all the other changes in the global economy, have an impact on the real estate industry. Despite the British referendum to leave the European Union that created uncertainty, and geopolitical tensions and refugee crises that constrain Eurasia’s regional recovery, global economies are rising and people can afford more every year.
GDP per capita (PPP) is increasing, the level of salaries is starting to pick up, industrial and manufacturing industries are showing better performance, and the commercial real estate market in general is showing better results. We cannot expect drastic growth, but signs are that the commercial real estate sector is on firm ground in spite of the numerous global and domestic headwinds, and that the coming year will be better than the previous one, for the entire global economy and for the commercial, retail, and industrial real estate industry, too.
- Demand for office space: increasing demand for prime locations
Demand for office space is solidly related with the unemployment level and urbanization. Employment growth is becoming slower, so the overall demand for office space will finally start equalizing with the supply. However, the demand for office space in prime locations in developed countries will support the market as it did in 2016. Demand for prime, quality office locations has increased during the last few years and is expected to grow more. The growth of prime office locations was 3% in 2016 and is expected to be 2% in 2017.
- Demand for retail space: traditional retail holds online retail end up
There’s no doubt that online shopping nowadays has taken away a large share of sales from traditional retail. That’s no surprise, because the use of mobile devices has increased significantly over the years and continues to grow: Statista forecasts that the number of mobile phone users will grow to 4.77 billion in 2017 and 5.07 billion by 2019, which is 18% and 26% growth respectively since 2013. Over half of an average adult’s daily time spent using the internet is on mobile devices.
Even though these are challenging times for traditional retail because of the growth of online shopping, the industry is growing and the market achieved impressive growth in Europe in 2016, where retail demand increased by 70%. Consumer spending is expected to hold up as wage growth increases through 2017.
- Demand for industrial space: industrial properties are on the rise
As mentioned above, online shopping numbers are increasing significantly. This means increasing demand for industrial space. online sales growth is expected to be 9-10% pa in the next four years. Industrial property is on the rise and the demand is not going anywhere. 2016 volumes should reach the second largest tally since 2008 and since online sales are only expected to grow by huge volumes, more industrial space will be needed.
- Expect the unexpected: how will Brexit and Donald Trump affect real estate
Last year came with a lot of surprises and some of those were so significant that it could turn the entire commercial property management industry around. The vote to leave the EU and D. Trump’s election as president means more caution and risk aversion among investors.
D. Trump created a lot of uncertainty, because of the riskiness of his policy decisions, his impact on the economy and his proposed actions for the Federal Reserve. These factors do not affect the commercial real estate industry directly, but will surely have an effect on the global economy, which dictates the trends for CRE too: a high-risk environment could lead to another financial recession.
In talking about the impact of Trump’s election, it might be too early to determine exactly how Brexit will affect the commercial real estate industry. Brexit caused devaluation of the pound sterling, and in this way, created an opportunity for property funds to offer discounted real estate assets for overseas investors. Even though Brexit created uncertainty between the investors and developers, lenders are still providing the perfect conditions for real estate acquisitions. Development and transactions are still being made on valuations made before or around the pre-vote.
- Technology: Driving Change in Real Estate
Experience remains the most important thing for tenants. Now you have more possibilities to show your properties around and increase the level of visualization. The recent use of drones is expected to gain more steam in 2017, especially in the real estate industry.
What is more, today‘s property managers have bigger responsibilities than traditional rent collection and paying the bills. Today, they need to manage the contracts, analyse the property data, arrange insurance, do the accounting, plan and forecast the vacancy rate, send invoices and so much more.
In order to accomplish all these tasks efficiently, property managers need to respond to the changing market and its tendencies, beware of new technologies and find additional ways to optimize their work. It is difficult to do that if your property management processes are not optimized. Today there are a number of software solutions like Soft4RealEstate – a solution for commercial and mixed property management, that can help a property manager do all their tasks faster and easier, and at the same time, help maintain good personal manager-tenant relationships.
Every year comes with its challenges for property managers. 2017 brings its own trends and tendencies and it only depends on you as to whether it becomes a year of challenges or advantages for you and your property business.
In a world of uncertainty, it is important to be prepared for what’s coming. Ultimately, despite all the uncertainty, the economy seems to be rising, along with the commercial real estate industry. What are your next steps to prepare for the things to come? Prepare the right ammunition to fight what might cause you problems and turn them into your advantages. May 2017 be a year of growth and success!
Read more about how to prepare for every specific trend in our upcoming blogs. Subscribe to our news, and get prepared for a battle with the property-management challenges that are coming!
I, at any rate, cannot wait to learn more. Can you?