5 Trends in Commercial Real Estate for 2016

5 Trends in Commercial Real Estate for 2016

The Commercial Real Estate, or CRE sector appears to have a stronger foothold in comparison to previous years.  Investors are seeing increased performance across all property types and markets as the US market is picking up speed again. Even with these encouraging signs, it’s understandable for investors, especially new investors, to be overly cautious or reluctant. With INCO Commercial, we can help alleviate your fears with a comprehensive approach to your commercial real estate investments. Our expert agents are highly knowledgeable and specialize in the local market and can guide you each step of the way. Though you don’t have to worry about navigating the commercial real estate landscape alone, INCO Commercial has compiled for you a list of 5 trends we expect to see for the 2016 year.

Global Urbanization:

Urbanization is on the rise throughout the world, and especially continues in the U.S. Millenials are seeking access to places to jumpstart their careers, and Baby Boomers are downsizing their homes,  moving towards more urban places of convenience. It has been noted that, the United States urban population has grown by 12.1% from 2000 to 2010, over the California’s total increase of 9.7%. Additionally, suburbs are beginning to take on a more urban appearance, with mixed-use development and the ability to reach more places in walking distances, versus having to rely on vehicular transportation. As this trend of urbanization continues, it is definitely creating more demand for home, retail, offices as well as other property types.

Unemployment Falls, Demand for Space Rises

With unemployment rates projected to fall below or hover around 5% this year, this is also creating a demand for commercial real estate space in the form of multi-family housing, office space, industrial/distribution space, and even retail spaces. The growth in job opportunities and income has created an optimistic mood for California, and reveals continued confidence among developers, as noted by the latest Allen Matkins/UCLA Anderson forecast for commercial real estate. This job and income growth has also limited the supply in office spaces, to which developers have happily answered with starting new projects, and projecting even more for 2016.

Spike in Interest Rates:

Interest rates look to increase this year; though predictions can vary greatly, it is more likely that the Federal Funds Rate (FFR) will increase at least to 1% this year, along with the treasuries of 10 years moving slightly higher towards 3% mark. There are varieties of variables responsible for the interest rates being low for now, like the strong dollar as well as low inflation. However, the Fed is likely to proceed with caution and examine the consequences of any action before implementing something that would stir current economic growth trends.

Increased Capital Flows:

Increased international capital into the U.S. market will likely continue and even increase. The U.S. real estate market is viewed as the most stable and secure marketplace, making it an easy option for many investors. According to the research company, Real Capital Analytics (RCA), 2015 saw foreign purchases alone of U.S. real estate assets increase to $62 billion, with Canada, Norway, China and Singapore as the countries with leading investors. These types of investments are only expected to increase in 2016.

Shifts in the Use of Retail Space

Clothing and department stores used to dominate the retail landscape, but lately we have seen the fall of even some of the major retailers. JC Penney, Sears, Kohl’s, and Kmart, to name a few, are among those closing their stores. Despite these trends, there is an anomaly named Amazon who successfully opened their first retail storefront last fall, and project opening more in the future. Some analysts predict that many successful retailers will continue to offer a combination of physical stores and online experiences as well. Many retailers are also transitioning their space from simply a place to buy merchandise to an all-around experience for the consumer.

However, for those traditional retailers closing stores and leaving vacancies, we are seeing an increase in other industries occupying these spaces. Technology-based stores do well since their products are in demand, and profits easier to turn with the more expensive price tags. Health and fitness are consistently popular trends, and many gym, activity, and fitness centers have capitalized on people’s continual quest for physical self-improvement.


With the overall 2016 forecast looking like a successful extension of 2015, let INCO Commercial take your investment goals to the next level this year!  INCO Commercial works with each client to assess and evaluate their business goals and objectives, and find the opportunities to best suit their needs. Our affiliated services, CORE Property Management and IMC Municipal Consulting can also assist in handling full-service property management or real estate advisory services, respectively. Visit our contact page to fill out an inquiry form, or find the INCO location most convenient for you and give us a call!