Job growth and a higher demand for multi-family housing are expected to spur property value growth for commercial real estate during the coming year.
2016 saw gains in the profitability of commercial real estate across the United States, a trend many experts attributed to a rebounding economy. Many Arkansas investors were pleased with the increase in commercial property values, and they will be relieved to know that this trend is expected to continue in 2017. The following factors explain why commercial real estate appraisals are likely to bring good news to Arkansas property owners in the coming months.
2016 Year-End Projections
If commercial real estate projections for the Little Rock area serve as a benchmark for the rest of Arkansas, it is anticipated that the most growth will be seen among asking prices for industrial and retail sales. Industrial sale prices have increased to more than $36 per square foot, a $6 increase per square foot since 2014. Retail asking prices are expected to climb higher, reaching $100 per square foot—a stark contrast from the low $88 per square foot seen in 2013. Meanwhile, Little Rock office spaces for lease will continue to see a steady increase. All of this is, of course, good news for anybody investing in commercial real estate.
Strength in Smaller Markets
The National Association of Realtors (NAR) has predicted that the commercial real estate sector will weather uncertainty in global and domestic markets. NAR Chief Economist Lawrence Yun says the greatest strength and growth in commercial real estate property values will be seen in smaller markets across the country. “Prices in smaller markets should continue to climb with strong tenant demand and declining supply supporting growth,” Yun said.
Solid Job Growth
The NAR has also projected an increase in commercial real estate values linked to increased job growth, along with a higher demand for multi-family housing options. “As job creation continues, commercial real estate and vacancy rates will be stable across the country,” Yun said. With many companies expanding their operations, they find themselves in need of a larger space to house their employees. As such, they turn to commercial property investors to rent out everything from office to retail space.
Unpredictable Interest Rates
The only area of uncertainty when it comes to 2017 commercial property projections is what will happen with real estate interest rates. There has been a lot of talk about an anticipated increase in interest rates across the board, which could undoubtedly have a negative effect on the market. K.C. Conway, senior vice president of credit risk management at SunTrust Bank, explained that “housing and consumer spending are the two components buoying the economy. If the Fed increases short-term interest rates, both of these components will be affected.”
If you are investing in commercial real estate appraisals in Arkansas, contact Ferstl Valuation Services at 501-313-0641 to schedule an appointment.