With the end of the year upon us, we can finally take a complete look at how the commercial real estate market has performed throughout 2014. However, 2015 holds an endless array of unknowns. How will the market perform? What other factors can we expect to impact commercial real estate? How will this differ nationally to locally?

These questions do not yet have answers, but we can offer our best predictions for what we can expect to happen within the commercial real estate market for 2015. Let’s take a look at where the current trends are likely to lead us in the coming months for both nationally and locally within Central Pennsylvania.

National Market Predictions:

Multi-Family: The rent market is predicted to remain in the landlords’ favor in 2015. Vacancy rates are expected to stay below 5 percent which will likely lead to an increase in rental rates, well above inflation. Apartment rents were projected to increase 4 percent in 2014 and are again expected to increase by 4.1 percent in 2015.

Office: Vacancy rates are predicted to fall from 15.7 percent to 15.6 percent in 2015, with rents expected to rise by 3.3 percent.

Retail: Experts predict that vacancy rates nationwide will drop from their current 9.7 percent to 9.5 percent in 2015 with average retail rents increasing by 2.5 percent.

Industrial market: Industrial real estate vacancies are expected to rise from 8 percent to 8.4 percent next year, while annual rents will continue to rise by another 2.9 percent.

Central Pennsylvania Market Predictions:

Multi-Family: The multifamily investment sales market will see continued appetite for apartment properties. Rents will increase to more than $1.25 per square foot and the market will continue to absorb new units as they get delivered. Overall, 2015 will be a good year for multi-family real estate.

Office: Market fundamentals continue to trend in a positive direction. The combination of measured new construction, tenant expansion and lessening office contractions will continue to contribute to restoring health to the Central Pennsylvania market. We expect asking rents to continue to stabilize and rise modestly in 2015. On the office investment side, we anticipate medical office space will continue to receive the most investor attention.

Retail: The retail sector will continue to see retailers moving into smaller spaces as they balance brick-and-mortar locations with online shopping. We also predict continued growth of fast-casual restaurants and an expansion of fast-fashion and discount retailers. Owners of power centers and grocery-anchored retail properties will rethink how they use space to fill vacancies in 2015 and beyond.

Industrial: Three main themes are emerging in the industrial sector that will follow into 2015: Rents will continue to climb; tenants will begin shifting to leasing light industrial, or smaller industrial properties in the 50,000 to 250,000-square-foot range; and companies leasing industrial space and landlords developing these properties will increasingly begin to provide more on-site amenities to employees. Development of mega distribution facilities will be limited by the availability of suitable locations.

These predictions for the New Year are what you might expect when looking at the current trends in commercial real estate. It’s important to think ahead as to how they might impact your business or the community in which you live. While some sectors are expected to contract, others show signs of promising growth. In addition to the future of the commercial real estate market, the success of 2015 still lies in our own hands. Best wishes for your best year yet – from your friends at Omni Realty Group!

Share your own predictions for the commercial real estate market in 2015 by commenting below!