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Posts tagged "millennials"

Home» Posts tagged "millennials"

Predictions for Trends and Changes in Commercial Real Estate in 2017

Posted on February 6, 2017 by Mike Kushner in Blog, Commercial Real Estate, Trends No Comments

2017 trends concept - handwriting on a napkin with a cup of espresso coffee

It’s the start of a new year and naturally this turns our attention toward what we predict will happen in the coming 12 months. Specifically in the commercial real estate market, there are several noteworthy trends and changes we predict to take place in 2017. What are these and how will they impact the various sectors of commercial real estate? Here’s the breakdown!

Office Real Estate

Experts are predicting that suburban markets will outperform downtown markets in 2017. Suburban rent growth is anticipated to exceed 2% while vacancies will only increase 10 base points (to 14.5%). In contrast, downtown vacancies are expected to increase by 30 base points (to 10.9%). The explanation to this growth is that suburban development is catering to millennials who want to live, work and socialize all in the same area. While national occupancy in downtown office space will still far exceed the suburban markets, suburban office space will have a much higher growth rate in 2017, relatively speaking.

Industrial Real Estate

Out of all of the sectors, industrial real estate will have the best year in 2017. Major growth in e-commerce as well as technological advancements, like driverless vehicles, have been fueling this sector’s growth. As these industries continue to thrive, so will industrial real estate! Availability sits at a 15-year low while net occupancy achieved its 26th quarter of record gains (as of Q3). Best of all, rents continue to climb toward a record-setting high. Because it wouldn’t be fair not to throw in a little bad news to keep things balanced, the sector is expected to slow down a bit as the result of a wane in user demand.

Retail Real Estate

2016 was not a good year for retail and it looks like 2017 will continue to get worse. Brick-and-mortar stores are closing and consolidating while e-commerce proves to be the way of the future. Online sales are expected to increase by 15.5% (to 9.2%) this year. On a brighter note, Class A malls are expected to maintain or increase their rents per square foot, as they have for the past five years. Also, experts predict that mixed-use lifestyle developments will be a possible solution for brick-and-mortar locations to compete with e-commerce. Finally, community strip centers are expected to grow by 1.7% in 2017.

Hotel Real Estate

In 2017 we expect to see a healthy labor market and wage growth which will ultimately benefit hotel real estate through an increase in leisure and business travel. However, major competitors to the hotel market, such as Airbnb and similar home-sharing businesses will continue to thrive. This is expected to steal sales from hotels as the concept of home-sharing becomes more mainstream and robust.

Multifamily Real Estate

Overall, experts are optimistic for the multifamily real estate market in 2017, but that’s not without a few key challenges. An increase in supply this year will drive up vacancy rates and impact rental rates as a result. Interestingly, it’s the high-end apartments that will experience the most shrinking rents, while Class B and Class C apartments will be less impacted. This is the first time since the Great Recession that supply outpaced demand, as it did in 2016. It’s expected to continue into 2017 which leaves some major hurdles to face moving forward.

What sector of commercial real estate do you think will be the most changed in 2017? Share your insights by leaving a comment!

2017, business, decrease, demand, growth, hotel, increase, industrial, investment, investor, local, Mike Kushner, millennials, multifamily, national, news, office, Omni Realty, predictions, retail, supply, trends, young professionals

Central PA’s Demand for Rental Units is Booming: What this Means for Economic Growth

Posted on July 30, 2015 by Mike Kushner in Blog, CPBJ Articles, Local Market, Trends No Comments

Note: This article was originally published by the Central Penn Business Journal. Click here to read the original version.

Earlier this summer the Tri-County Regional Planning Commission (representing Cumberland, Dauphin and Perry counties) met to discuss current and future socio-economic trends that will influence land-use decisions and related impacts.

The data and statistics shared provided insight into some powerful trends that are emerging in the local real estate market. Based upon the growing population of both Baby Boomers and Millennials that will continue to make up the majority of our population in the Harrisburg Metropolitan Statistical Area (MSA) well into the future, these generations are going to have a profound impact on our economy.

While you might think the demographics of these generations would both want a large home in the suburbs, you would be mistaken. Rather, for various reasons, both Baby Boomers and Millennials are anticipated to drive the demand for rental units. Let’s now take a closer look at what exactly is causing this trend and the implications it will have on local economic growth.

The Cause: What’s fueling this trend?

According to the information shared by the Tri-County Regional Planning Commission, this year, Millennials (age 15-34) will make up one-third of all adults in the United States and will finally outnumber Baby Boomers. While the ultimate goal for these Millennials, especially ones who have started a family, is to move into the suburbs, the majority of this generation doesn’t yet have the savings they need for a down payment on a home, thus the necessity of renting. Additionally, more than half of millennials are likely to move in the next five years, making renting housing even more of a convenient and desirable option.

Now let’s take a look at why Baby Boomers are also fueling the demand for rental units. Nationally, one in five people are expected to be over the age 65 by 2030. Older Empty Nesters (age 65-74) are the fastest growing segment of the population in Harrisburg MSA. While this reflects a growing aging population, Baby Boomers are not yet ready to slow down. They are mobile, social and want to remain as active and independent as they can. Rather than being strapped down by caring for a home that is too large for their empty nest, Baby Boomers are moving into luxury rental units that give them ultimate flexibility, freedom and a close-knit community.

The Effect: What does this means for economic growth?

Retiring Boomers will Hurt Consumer Spending and Economic Growth

Baby Boomers are currently our most affluent generation and will be responsible for the largest transfer of wealth over the next 30 years. With that said, Baby Boomers will actually hurt economic growth by not spending their money on things like housing, insurance, appliances and apparel. Rather, they prefer to spend their income on entertainment, travel and social experiences. To further illustrate this point, in Harrisburg MSA, the average household expenditures by 2015 show people spending as much on entertainment as they do housing.

Household Expenditures by Geography 2015

Such spending habits again strengthen the demand for rental units as they require less money and maintenance than owning a large, single-family home. As a result, we can expect rental prices to remain competitive, and while they may rise slightly in response to demand, they will remain reasonable  to both Baby Boomers and Millennials relative to income and in comparison to the cost of owning a home.

Apartment Asking Rent Harrisburg MSA 2015

As for rental vacancy rates, these are expected to remain low through 2019. This is great news for owners of rental properties and developers who are looking to expand into this area. It’s a safe bet that a growing number of renters will be in the market for housing that will allow them to live life well, while still conserving money for whatever their priorities may be.

How Central PA can best harness this economic growth

Central Pennsylvania would be smart to take note of this important trend. If you identify with either Baby Boomers or Millennials, know that renting may be a viable option for you at this point in your life. With new projects on the rise, you are likely to find some very nice accommodations at competitive prices that are far less than the cost of a mortgage. This will allow you to channel your wealth into saving for a future home of your dreams, or spending it on life experiences you’ve been waiting until retirement to enjoy.

For businesses, real estate brokers and developers, this is also a powerful trend that can impact your industry. Get to know the Baby Boomers and Millennials – their habits, preferences, indulgences and priorities. Appealing to these growing generations will ensure your business will also continue to grow well into the future.

Click here to read the original article published by the Central Penn Business Journal.

[Online Resources] Real Estate, apartments, article, baby boomers, blog, camp hill, central pa, central penn business journal, commercial, cpbj, economic growth, Economy, future, harrisburg, housing, lancaster, local, mechanicsburg, Mike Kushner, millennials, money, news, pennsylvania, prediction, renting, spending, trends, writing, york

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