Although we are already over half a month in to the new year, there is still plenty of time to make new predictions for what 2014 will bring to the commercial real estate market. As 2013 ended in ramped up fashion, it seems that the momentum and shift in the economy is carrying over drastically to the beginning of 2014. What the year will bring is still uncertain, but here are the top 4 predictions for Monroe commercial real estate for the upcoming year.
Economic Growth Will Increase Dramatically
Growth over the past few years has been steady at 3.1 percent, but the previous Q3 rate of 4.1 percent shows that we are moving forward in to the upcoming year. Consumers are increasing their spending habits and nearly $1 trillion of real estate debt has been paid off. As commercial real estate interest rates remain low in comparison to years past, debt is now the lowest level in over 30 years. What we are seeing now is a confidence in consumer buying as disposable income becomes more relevant each day that passes by. Of these main economic sectors though, those that will play a huge part in the economy are:
- Technology
- Energy
- Agriculture
- Housing
As these four markets start to increase, so will the economic growth rate. Look for higher consumer spending and of course, higher confidence in spending as well.
Interest Rates Will Continue To Rise
Before anything else is said, everyone knows that the whole commercial real estate interest rates will increase quote has been very dominant in our society for over half a year now. Anyone who can read a paper or an internet article can notice that interest rates are going to keep going up. What they don't know is that although they are increasing, this is a great sign for our economy. The higher the rates, the higher our economic stability. No one truthfully wants to pay 4.5% on any interest rate, but in comparison to where they were in previous years, this is still quite minimal of a purchase. Rates will more than likely continue to stay around this range until 2015 as the Federal Reserve will slowly taper away their purchasing of bonds. With that being said though, commercial real estate rates are looking to increase once again.
New Construction Will Remain Low
Even as 2013 came to an end, we did see multiple new real estate properties being built around the metroplex. With that being said though, the amount that we saw is still drastically lower than before the market collapsed. 2013, 2011 and 2012 were all tied for the weakest years for new construction since the late 1970s. What this means for the amount of inventory on the market currently is that the "sellers" market we are experiencing right now may last through out the year. Although this may change drastically around the summer months as it did last year, in the sense that values spiked, we are currently thinking that what we have on the market and pre-built will remain what is available.
Investments Will Increase For Commercial Real Estate
Last year we saw a transaction volume over $300 billion, up a staggering $70 billion in 2009, but still quite below the $570 billion of 2007. From a market perspective though, 2014 will look a lot like 2013. Transaction volume is set to increase, and both equity and debt investors will target commercial real estate. Look for an increase in foreign investors to make their way to Monroe commercial real estate as the prices will rise, but still substantially less than they were in 2007. Overall, the increase in investors will just increase commercial real estate immensely.
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