Regardless of the ups and downs through the trend cycle, experts agree that the commercial real estate market is unwavering. Now that we’re well into the year’s halfway mark, the appraisal management experts at Oxford AMC are breaking down today’s current trends in the top commercial real estate sectors. After all, the necessities, trends, and forecasts become very particular when dealing with various market sectors. It’s important to take a step back and review each sector for its own trends and quirks.
Whether we’re looking at vacancy rates, retail challenges, or currently-evolving mechanics, this year’s market is sure to continue to keep lenders and appraisers on their toes. Here’s what we know in relation to the top market sectors of commercial appraisal management:
Commercial Appraisal in Market Sectors
Commercial Appraisal and the Retail Sector
Last year (2017), approximately 81 million square feet of newly-established retail space being forecasted to be completed throughout the United States. However, despite that whopping number, the retail sector of commercial real estate currently sits well below historical standards. To put it in comparison, 81 million sq. ft. is less than half of the pace of construction during market sector peak throughout 2007 and 2008.
Since demand within the retail sector has weakened, construction has been relatively muted. Retailers have shifted their focus on building smaller stores and creating smaller, brick and mortar footprints in more urban developments and areas. Even typical big-box retail brands like Target and Walmart are seeking out smaller concepts in order to continue growth and compete with a booming e-marketplace.
When it comes to commercial appraisal within the retail sector, it is important to team up with an experienced and trusted Appraisal Management Company (AMC). At Oxford, engage appraisers on our clients’ behalf. We believe our clients are our partners, and we pursue the completion of their projects with the utmost efficiency and professionalism. Our goal, as any AMC’s should be, is to set our clients up for a beneficial and lasting mark on the commercial real estate market.
Commercial Appraisal and the Industrial Sector
Recent data suggests that the United States industrial sector is among the most successful markets of our time. In fact, last year’s commercial real estate forecast report estimated 45 million square feet of industrial space was completed in the first quarter alone, making it the highest first-quarter level since 2008.
Additionally, an international trade deficit decline has, in turn, molded a positive feedback for the industrial real estate sector since imports generate more aggregate warehouse demand than exports. Consider this: online retail sales were steadfast in the first quarter of the year with. Technology and e-commerce giants like Amazon, along with consumer confidence due to healthy wages, job growth, and home price gains, continue to make the industrial space soar. It has proven to stand alone as the sector that can survive through economic deficit.
Commercial appraisal management becomes particularly necessary in the industrial field when it comes to forecasting and preparing for future trends. For example, Oxford’s highly-skilled and experienced appraisers, nearly all of whom hold the MAI designation, perform every technical review of industrial spaces and sectors. At least quarterly, your AMC should be providing you with accurate client and market data reports that will keep your industrial establishment in check and prepared for the future.
Commercial Appraisal and the Hotel Sector
The hotel industry was one of the first, alongside the industrial industry, to historically bounce back after the 2008 financial crisis. Therefore, lenders and regulators are always smart to keep an eye on this side of the commercial real estate industry.
Throughout the past year and into this year, certain service brands have continued to expand, particularly in the boutique hotel sector. Boutique hotels offer limited services, as opposed to their full-service sister brands. Profit margins for boutique hotels can be greater and tend to exceed other real estate segments, too. Regardless, however, the hotel sector has proven to be a profitable market in the world of commercial real estate.
When it comes to commercial appraisal management, Oxford, for example, has worked with both lenders and regulators to offer unmatched third-party appraisal management expertise for hotel owners and partners to financial institutions. A close relationship between the hotel sector and an AMC, we believe, is vital to ongoing and profitable success within the industry.
Commercial Appraisal and the Office Sector
If your city is one filled with newly-erected and blooming apartment construction sites, you’re witnessing growth in step with occupancy. As times unfold, more millennials are opting to rent apartment spaces as opposed to buying, and many retirees are looking to downsize from their current homes.
As this trend continues, more apartments will become available, and our economy is likely to absorb them, especially with a sturdy job market and robust demand for work upon apartment establishment.
Something to keep in mind, though, is that developers are having a tough time finding the funds to build new projects because lenders are less willing to give construction loans. Could that lead to a decrease in apartment units and commercial office spaces delivered in subsequent years?
While the answer may not be crystal clear, we can tell you this: it is important for sector owners and lenders to pair with a trusted AMC that will continue to monitor fluxing trends and appraisal tendencies. At Oxford, for example, we monitor our client’s appraiser throughout the process. Our client then receives automated email updates notifying them of progress along every step of the way. When completed, Oxford reviews and certifies the appraisal for compliance.
Making the Next Right Move
Despite the slowing trends within some sectors, the commercial real estate market’s future certainly looks bright overall. As we delve deeper into the second half of 2018, Oxford Appraisal Management Company will continue to monitor trends – both throughout the entire commercial real estate space and within particular sectors – so that our clients can stay ahead of the game and in the know.
In the meantime, be sure to team up with a trusted AMC that will help you monitor how your sector and individual business/establishment is stacking up against lending peers, along with preparing for trends that are developing and taking shape within the commercial real estate world.
Get in touch with the experts at Oxford AMC today. We pride ourselves on having always been committed to expertise, service, and independence – principles that continue to guide our firm and our trusted client relationships to this day.