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Predictions for 2014 commercial real estate market

With all the enthusiasm in the housing market, it is only natural to see the commercial real estate market follow the lead. In fact, some are saying the Houston area real estate market is the hottest in the world. Others say that Montgomery County is the hottest market in the Houston region. It is truly a good time to be a commercial real estate investor.

Here are the top predictions for area commercial real estate.

Apartment developers will continue to search for development sites. Rents rose about 6 percent in 2013 and are expected to increase further in 2014. Montgomery County is particularly attractive to renters because so many new residents are completely new to the area. They are looking for a nice place to live while they become familiar with their new environment. Many of them also will rent while their old home sells in another market.

With all the multifamily projects popping out of the ground, the risk of overbuilding could happen by the end of the year. At some point, moderation will set in while the savvy investor watches vacancy rates before breaking ground on another complex.

Retail will rise. In 2013, retail saw modest growth. While residential housing and office building led the way, the old commercial real estate saying “Retail follows rooftops” is coming true. Our area has added a lot of rooftops already and is rapidly increasing those numbers. Retail will begin to take off in 2014.

Hospitality will be happy. Hotels and motels will meet the need of the growing corporate environment in Montgomery County. Overall, the national scene is good for hoteliers with profits up in 2014 by 13 percent, as predicted by PKF hotel consulting firm.

Residential developers will continue to push for more lots. The only real influence holding back builders right now is the lack of buildable lots available. The scramble for land and labor is fierce. Land holders with property to sell for residential development should get it listed immediately. It is not likely that the demand will be greater in the near future.

Because developers are so far behind the market demand, many builders have become developers themselves and are pre-selling homes before the lots are even ready. According to John Burns Real Estate Consulting, the Houston region leads the nation with the greatest number of single-family permits in the nation. They also predict that we still will be in front of other markets in 2014.

Expected increases in interest rates will dampen the enthusiasm for commercial development a little. Commercial investors and developers look to the number to decide on the feasibility of any project. As interest rates increase, developers may pay less for the raw land or decrease the amenities to compensate for the added cost of building.

For both commercial real estate buyers and sellers, the time is now to take advantage of the marketplace. The demand is huge right now but will eventually reach a saturation point. Some say it will be 2015 or later. Others say commercial real estate will relax before the end of 2014.

Reprint from YourHoustonNews.com   by Marion Franks

Categories: Uncategorized
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