Commercial Market Posed For Expansion

Barrister Place Building

Given the stability of the economy and relatively few indicators of over building, the commercial real-estate industry maintains its expansion cycle.

According to Calvin Schnure, senior economist for the National Association of Real Estate Investment Trusts, people in the related field are focusing their attention on increasing interest rates. However, others are also becoming wary. Schnure also adds that people should expect the expansion cycle to continue for a long period of time. In relation to this, growth in commercial real estate industry should be modest.

During his campaign, Trump made promise regarding the boost in infrastructure spending and cut in income tax rates. If he can accomplish those things, then improvements in the economy may be expected. However, the impacts of such policies cannot still be quantified at the moment. Meanwhile, the increasing interest rates after the election may place the industry and the economy at certain risk if they are not addressed properly.

Schnure also indicated that the two signs, which were associated with past recessions, are not yet obvious at present. The first sign in overheated economy. In this condition, inflation rates are noticeably rising. The second sign is overproduction of buildings, vehicles, and other important manufacturing measures. Schnure clarified that the country is not yet at those levels.

Given the robustness of construction activity regarding apartments, rent increases have slowed down. However, in some commercial property sectors, such as office and retail, demand in space surpassed supply increase.

Meanwhile, for real-estate investment trusts or REITs, which are companies in charge of managing property portfolios, occupancy rates suffered a hit of 94.1%.