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The Strongest Markets for Commercial Real Estate in 2014

Growing industry sector, favorable demographics, increasing home prices and high customers’ demand – all these trends will continue to accompany the U.S. real estate market in 2014.

The Strongest Markets for Commercial Real Estate in 2014

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According to economic forecast, in 2014 American real estate market will gain its momentum. Moreover, it will be a year of expanding the markets. Many investors who have traditionally focused mainly on large markets such as Chicago, Los Angeles, New York City, San Francisco, and Washington, D.C., are going to explore other cities in order to protect their capital. As opposed to previous six top markets, next year the focus will shift to top 25 markets. New markets have a great potential for growth as well as a high demand for new housing constructions.

In spite of first signs of forthcoming economic crisis, the majority of analysts predict that the housing market will continue to develop and normalize. In terms of market sectors’ popularity in 2014 the rank will be as follows:

  1. Industrial/warehousing
  2. Multi-family
  3. Office
  4. Retail

Chicago

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Among the predictions that will embrace U.S real estate sector in 2014 are the following:

  • Industrial leading will rule the sectors within the commercial real estate market
  • Multifamily housing will remain popular among the investors due to the high demand from Generation Y and baby boomers seeking to rent
  • Mortgage rates are expected to increase
  • Regions with large tech companies are going to have stronger commercial real estate
  • E-commerce, especially with next-day delivery, will require a significant number of centers close to major cities
  • Foreign investors will be the top source of all investments

Secondary U.S. Markets Will Lead the Recovery in 2014

Next year the growing number of investors is going to look for new investment places. Some of them will continue working with the top investment markets of the past years, while others are going to explore new opportunities and potential markets to earn a higher return. To understand where it is better to invest money, let’s see the forecast of the strongest real estate markets in 2014.

Austin

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Thus, Urban Land Institution endeavors to make a list of markets by their rank in the annual report “Emerging Trends in Real Estate 2014.” The report is based on the analysis of the surveys submitted by 1.000 individuals – real estate professionals.

The Urban Land Institution has been looking at three sectors: investment, development and homebuilding. So, it appears that in 2014 the top 5 markets will remain the same as in 2013: San Francisco, Houston, San Jose, New York and Dallas. Then, it goes Seattle which is also seen as one of the most perspective investment markets next year, followed by Austin, Miami, Boston, etc.

San Francisco Remains the #1 Market for Commercial Real Estate in 2014

San Franciscojpg

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According to the “Emerging Trends in Real Estate 2014” Survey, for the second year San Francisco becomes a top-ranked city for the real estate business. San Francisco remains a solid investment area for all property types. It was ranked first for homebuilding prospects, secondly for development and thirst for investment. Despite being one of the most expansive markets, San Francisco will continue to prosper in 2014. The analysts predict 36% of new residents moving into the metropolitan area, 4,2 % growth of gross metro product and 5.5% growth in personal income.

Houston Is Seen as an Overwhelmingly “Buy” Market

Houston

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According to the above-mentioned survey, Houston has become the first-rated market for investment and the second-rated market for homebuilding prospects. It has spiked from number-five position in last year survey to the second place. The buy ratings for Houston are very high: buy recommendations for all 5 property types given by the respondents have been scored higher than average.

San Jose Will Benefit Developing Tech Industry

San Jose

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San Jose ranks a third place in the list for the second year. All three components – investment, development and homebuilding prospects have received high scores by the survey’s respondents. Such rapid economic growth is caused by the development of the technology industry. The rising income and high employment rates will support real estate demand in this area. Leading tech firms, innovative companies and highly educated population – all these factors will remain the main drivers of San Jose economic rise. The only fear of analysts is high prices.

New York City: Rental Apartments and Hotels Are the Best Property to Invest in

New York City

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The investment and development scores for New York are still good, however, they are down from last years’ levels and there is a growing concern that prices will become higher in 2014. The best opportunities for developing and investing in New York are rental apartments and hotel sectors. The economic situation will continue to improve due to the high employment rates. Moreover, it is predicted that job growth will get even more support from goods industries in 2014.

Dallas Has Made a Big Jump in Homebuilding Prospects

Dallas

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Dallas has been rated highly for its investment and development opportunities, but it was the highest homebuilding prospects that helped Dallas to move up in the list. The report says:

The Dallas economy will continue to benefit from high concentrations of technology, corporate headquarters operations, excellent distribution infrastructure and above-average population gains

Concerning “buy” recommendations, the respondents advice to bet on the industrial/ distribution property in 2014.

 

Seattle – a 2014 Hub for International Investments

Seattle

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According to “Emerging Trends” report, Seattle is the fourth-best place in the country to invest. If we look at three sectors – investment, development and homebuilding – Seattle is the sixth strongest market in the country. One of the reasons for Seattle’s rapid economic growth is a “high rate of educational attainment.” Due to the growing concentration of tech companies, such as Amazon.com, Classmates.com, WhitePages.com, etc., a huge influx of foreign investments is expected in 2014.

 

International Markets to Watch

Asia-Pacific Real Estate

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Asia-Pacific Real Estate Markets Will Continue to Grow in 2014

 

Asia’s real estate rates will remain strong in 2014, according to the “Asia-Pacific Emerging Trends in Real Estate 2014.”

Stuart Crow, Head of Asia Pacific Capital Markets, notes:

As we look towards next year, we expect the momentum we have seen throughout 2013 to continue, as new sources of global capital increase equity in the region.

 

Investment popularity will be distributed by the following rank:

  • Industrial
  • Residential
  • Office
  • Retail
  • Hotel

Among the most attractive Asian-Pacific region the report lists Tokyo, Shanghai, Jakarta, Manila and Sydney.

“Given the robust pipeline, increased equity and unrelenting demand, we remain positive in our outlook for 2014 and, at this early stage, expect transaction volumes to exceed our predictions for year-end 2013.”

Tokyo Is Being Seen as No 1 Property Investment Market in Asia-Pacific Region

Tokyo

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After a five-year absence from the top rankings, Japan is becoming one of the favorite markets for investment and development. Tokyo’s increasing popularity is motivated by the government’s economy stimulation plan, resulted in a number of property purchases and rising home prices. Tokyo is particularly interesting for investors as the best bet for the hotel business, since the city has already started the preparations for the 2020 Summer Olympic Games.

Shanghai is Predicted to Become the Second Most Attractive Asian Market

Shanghai

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Shanghai is well-known as low-risk market and is perfect for those investors who unwilling to have their business in the less-known cities. Shanghai provides the so-called “level of comfort,” giving the investors a mandate to place money in China.

Jakarta Is a Third-Ranked City for Investment

Jakarta

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In spite of some economic difficulties and the lack of market transparency, Jakarta is seen as an attractive place for investments and development prospects. The city has a strong demand from companies seeking office space, especially the under-supplied central business district.

Manila Attracts with the Fast-Growing Economy

Manila

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Due to the step-by-step improving of the marketing situation and more transparency, Manila has become fourth city to invest in. The increasing number of outsourced services and companies, demographic growth and investments from local citizens working abroad, makes Manila eight in the list for development potential.

Sydney’s Housing Boom Is Expected in 2014

Sydney’s

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Sydney ranks a fifth place in the rating. Despite relatively weak office and retail markets and instability in the financial and mining sectors, Sydney will attract both local and foreign investors in the upcoming year. There is a predicted demand of office space and residential sector. The “Emerging Trends” Report makes a comment on the growing residential demand in Sydney:

We are seeing record weekend auction clearance rates and prices starting to go up – any release of land or residential apartments just gets sold out immediately.

If talking about Asia-Pacific real estate, it is also predicted an increase of the inflows into alternative markets such as Vietnam and Indonesia.

Dubai Real Estate Market Is Expected to Boost Due to the EXPO 2020

Dubai

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According to Fitch Ratings, Dubai real estate market will continue to improve in 2014 from the renewed interest from investors. Dubai will benefit from the flourishing tourism and local, regional and international investors:

This is happening partly due to the turmoil affecting the main Middle East tourist destinations and the positive impact this has had on Dubai as a major Middle Eastern preferred destination.

Besides, Dubai’s real estate market will see growth thanks to the preparations for the EXPO 2020. The recent reports demonstrate that property prices in Dubai rose by 28,5% during the first nine months of 2013. This is the biggest increase happened in the world in 2013. Mahdi Amjad, executive chairman, comments:

We felt the impact of the Expo 2020 win on the real estate sector from the first minute the results were announced.

In addition, population growth, increasing job rates mean that the housing demand will continue to rise.

Canada Continues to Attract Domestic and International Investors

Canada

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Today Canada’s economy demonstrates a solid growth, and this trend is expected to continue in 2014. Urbanization will be one of the main features of upcoming year. It will cause the active redevelopment of urban areas and the rise of new housing construction projects. Strong immigration rates and rising housing prices are considered to be another driver of Canadian real estate success.

Thus, development projects as well as condominiums and apartments for rent will be the main demand sectors in the country. With a perspective infrastructure and urbanization trend, there will be a growing demand for retail, office and residential space in the urban areas.

The forecasts show that Canadian real estate players are able to both invest and attract investors. With the US economy on the upswing, we are likely to see even more activity between the two countries.

The “Emerging Trends in Real Estate in 2014 for Canada” survey indicates that Canada is ninth biggest prospective real estate markets for investment and development in 2014. Edmonton, Saskatoon and Vancouver are the top four cities in Canada.

Vancouver

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Conclusion

In 2014 U.S. will be witnessing the highest rise of construction development and real estate recovery. Industry leading of the real estate sector will be one of the main trends of upcoming year. Moreover, 2014 will become a year of expanding to secondary markets. San Francisco, Houston, New York, San Jose and Dallas are considered to be the top cities to invest in.

Along with the U.S. market, investors should pay their attention to the developing Canadian housing market that promises a high demand for condominiums and rental apartments as well as Asia-Pacific region and Dubai which still remains a perspective area for real estate investments.

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