Interest rates and the economy is the chief concern for the real estate industry in 2018 and 2019, according to the Counselors of Real Estate, which released its annual Top Ten Issues Affecting Real Estate List. As interest rates rise, the commercial and residential real estate markets are already experiencing changes – decreasing demand for commercial property, and higher home mortgage rates. Rate increases also limit value appreciation for commercial real estate and make housing less affordable. Lack of wage growth for all but the wealthiest population segment is dampening housing demand, and limiting consumer spending that the economy needs for growth.
The co-working industry continues to grow and evolve throughout the country, and a new high-end concept will open its first-ever U.S. location at an Atlanta mall. Luxury workspace provider No18 has signed a lease at The Shops Buckhead Atlanta and is slated to open in fall 2018. No18 will occupy nearly 32,000 sq. ft. of space at the open-air center that spans six city blocks and features more than 50 stores and restaurants along a streetscape setting.
According to Chain Store Age, No.18 is described as a members club for businesses and will offer a range of curated, flexible workspace options in an upscale, sophisticated environment. No18 members will have access to a members lounge, premium private offices and dedicated desks. All members will be able to take advantage of the concierge-level services, fully equipped meeting rooms, and a luxe event area to host meetings and gatherings.
By Alex Pace, Managing Consultant, Dallas
Mixed-use properties continue to gain popularity in response to the growing desire for the convenience and walkability of urban living. Savvy real estate developers and owners understand that providing a vibrant mix of office and living space, restaurants and retail under one roof allows them to meet – and capitalize on – a variety of consumer needs. While implementing a “live-work-play” concept certainly adds value to a project, the relatively new and complex nature of a mixed-use property is creating valuation challenges for Appraisal Districts that could be costing you.
U.S. office vacancies across the major metro areas reached 11.5 percent in December, the lowest rate reported in a decade, due to cautious development and healthy absorption, according to Transwestern's newly released 2017 year-end report on the national office market. Significant net absorption in markets such as Dallas/Fort Worth; San Jose/Silicon Valley; Seattle; Northern Virginia; and Austin, Texas, contributed to this decline in vacancy, as did a deceleration in new construction starts during the fourth quarter.
By Carlos Villatoro, Senior Managing Consultant, Dallas
It is no secret that significant commercial real estate investments continue to pour into the great state of Texas. However, if an owner isn’t lucky enough to receive major tax breaks from local jurisdictions as an incentive to invest here, they will have to accept some of the highest effective property tax rates in the country. The tradeoff is that Texans enjoy a relatively low sales tax rate and zero state income tax rate. Fortunately, the Texas Property Tax Code offers multiple appeal recourse avenues, which allow owners and tenants alike to review the property tax liability from a fair and competitive standpoint.
Narrowing the field from more than 238 applicants, Amazon has announced their top 20 candidates for its second headquarters. When the unusual public contest was announced in September, city officials from across North America submitted proposals boasting potential tax breaks, local benefits and opportunities in an effort to win the $5 billion construction investment and 50,000 new jobs for their city. The list of finalists leans toward locations in the Midwest and South and on the East Coast, and away from the tech-saturated hubs of the West Coast. Many of the finalists, including Dallas, Denver, Raleigh, N.C., and Washington, were considered shoo-ins. More unexpected was Amazon’s selection of Columbus, Ohio; Indianapolis; Nashville; and Miami.
The commercial real estate industry will benefit as a whole from the tax code overhaul signed into law Dec. 22. But some sectors will benefit more — and sooner — according to top economists polled in a Bisnow article.
- Retail: The retail sector will likely be the biggest beneficiary, Colliers Chief U.S. Economist Andrew Nelson said, because of the lowering of the corporate tax rate. The tax reform law reduces the corporate tax rate to 21% from 35%, but because of deductions, not all types of businesses had effectively paid that same higher rate. "Retailers traditionally pay a high corporate tax rate because they don't have the same kind of deductions as other sectors," Nelson said. "When you lower the corporate rate overall, retailers tend to benefit a lot."
Many are predicting a leveling out of the commercial real estate market in the coming year. Texas Market Leader James Sutton discussed 2018 commercial real estate trends and the implications of the leveling-out process in the Houston market in this EXCLUSIVE with GlobeSt.com.
GlobeSt.com: What are the commercial real estate trends you are seeing in Houston for 2018?
Sutton: Decrease in overall vacancy for industrial properties, as well as a decrease in overall vacancy, increase in rent growth and zero concessions for multifamily properties. In addition, there will be a reduction in office sublease space as a result of the storm (Harvey). This is a short-term correction as a result of the office sector’s issues stemming from the energy market decline.