5 Commercial Real Estate Trends You Need to Know in 2024
As we step into a new year, commercial real estate is facing another important turning point.
Things have been quite uncertain lately, with the market going through lots of changes. In 2023, it was a bit shaky due to economic uncertainties. Companies changing their plans about employees returning to work, and interest rates going up, making it harder to borrow money.
Because of this, many real estate companies have been struggling with less money coming in, more empty spaces, and slower growth in rent prices.
But even with all these challenges, there are still reasons to feel hopeful about the future of the commercial real estate. Experts see 2024 as a chance for the market to stabilize and grow again.
Whether you own property, invest in real estate, manage properties, or rent them out, these changes can affect how you plan for the short term and the long term.
As experts who help people with all sorts of real estate deals, our Real Estate team at Terra Alma is keeping a close eye on the trends that could change the future of commercial real estate.
Here's what we're watching closely in 2024 and beyond:
1. The Changing Way of Returning Office
The biggest thing affecting commercial real estate is how companies decide to bring their employees back to the office. Since COVID-19, there's been a lot of back and forth, but now we're seeing more companies pushing for employees to come back.
They're worried about losing their company culture, not being able to train employees as well, and missing out on teamwork.
To make going back to the office more appealing, smart landlords and tenants are addressing employees' worries. Safety is a big concern, especially in busy city areas. So, some landlords and companies are increasing security.
They're teaming up with security companies and working with local police to make sure their area is safe. Even though cities are still the best place for offices because they're close to public transportation. Landlords and managers need to make sure their buildings are safe so tenants feel comfortable.
2. The Success of Top-Notch Offices
Companies are looking for top-notch office spaces, known as "Class A" spaces, to attract employees back to work. With many businesses adopting hybrid schedules where employees only come in part of the week, they're looking for smaller but better-quality offices.
These spaces come with extra perks like gyms, cafeterias, and outdoor areas for work. Tenants can upgrade their offices without paying much more rent. Property owners are also getting in on the action, planning to upgrade their buildings to attract tenants who want newer, nicer offices that their employees will love.
3. Commercial Real Estate and The Future of Interest Rates
In the past year and a half, interest rates going up have made things tough in commercial real estate. Because borrowing money got more expensive, there were fewer new construction projects and deals happening.
And the ones that did start had trouble because of the higher rates. Even people with existing properties had trouble getting new loans.
But in 2024, most people think interest rates will stop going up or maybe even go down a bit. If this happens, it could mean more new projects because borrowing money will be cheaper and easier.
4. The Changing Types of New Construction Projects
Traditional office spaces might have too many buildings already, so not many new ones are expected to be built in 2024. But there's a buzz about new construction starting up in other areas.
Places like the life sciences industry, universities, and public buildings are getting some attention. However, there might be delays on these projects because there aren't as many skilled workers available, like union contractors and electricians.
5. Ongoing Property Conversions
After the pandemic, there's a lot of extra office space around. So, people are thinking about turning some of these buildings into affordable housing. It's not easy though.
Some buildings are easier to change than others, like ones without a big open space in the middle for light and air, and no parking. But people are looking for ways to make it happen, with some places offering money to help with the costs.
Still, it's tough, so property owners want the government to make it easier by speeding up the approval process and maybe changing the rules about what kinds of buildings can go where.
Meanwhile, empty retail spots are getting a makeover too. Property owners with empty stores are turning them into places for fun, like entertainment centers.
They're trying hard to get businesses that offer fun stuff and give them good deals on rent. By bringing in more entertainment, they hope to get more people to visit the other stores nearby, making the whole place more appealing for even more shops to move in.
In Conclusion
As we look ahead in commercial real estate, there's hope for growth and change in 2024. Despite challenges, like getting people back to the office and navigating interest rates, there's optimism. With careful planning and innovation, the future looks bright for tenants, property owners, and investors.
Need someone to assist you in commercial real estate decisions? Contact Terra Alma today for professional real estate advisory in Atlanta.