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Future Trends of Commerical Real Estate

Updated: Nov 1, 2023

Generally, properties with less than 4 living units and less than 10 acres of land are considered residential real estate properties. Commercial real estate properties include office, industrial, rental, and retail uses as well as churches, government buildings, and parcels of land more than 10 acres. Some commercial real estate properties are for generating profits; some are not. For example, while rental properties are for generating profits, properties owned by churches, non-profit hospitals and schools and government agencies are considered non-profit uses. Therefore, the appraisal methods used for profit generating properties and those used for non-profit properties are different. For rental properties, the primary consideration for owners is maximizing their profits and reducing their costs while maintaining substantial amenities and doing updates to meet customer needs and consumer requirements. For non-profit properties, the focus is on keeping costs of ownership and operation low and maintaining a consistent budget. Because of the information age, there have been significant changes in the requirements for both residential and commercial properties. This leads us to the question of what the future trends in commercial real estate properties will be.

Multifamily properties are considered commercial real estate. Right now, multifamily properties are very popular for baby boomer retirees and younger generations. Some builders are building 55+ communities to meet the needs of baby boomer retirees. These communities are close to hospitals, pharmacies, and parks. Some of these properties provide full time nurses and pharmacies; many of them provide exercise facilities, recreational programs, and social and community service clubs and programs. These communities come in various ownership and management structures, such as cooperatives, condominiums, and apartments. The younger generations prefer rental apartments with upgraded amenities such as swimming pools, high speed internet service, exercise facilities and clubhouse facilities which can be used to host parties or meetings. Another priority for younger tenants is being close to parks, restaurants, shopping centers and colleges. Right now, most multifamily investors are focusing on either buildings targeting senior living or those targeting younger generations; they are generating profits while they meet their customers’ requirements. Most of these profits come from rental income and capital gains as the value of these properties increases over time. Additional income can come from renting parking spaces and coin-operated laundry machines. While these developers and investors consider profits, they also consider how to best attract customers by providing as many amenities as possible to meet customers’ needs. Some older apartment buildings do not include elevators. Most of the new buildings include elevators for the convenience of the tenants. Most 55+ buildings include elevators. For residential buildings, an extra room or space for a home office will become a more and more popular trend in the future because of the new technologies and office policies that allow people to work from home some or all of the time. I think in the future, elder communities, like the Mayflower and Westminster, will provide more amenities and exercise and healthcare facilities, and also have more variety in property choices, such as single family house, duplex, condominum and apartment. These kind of communities with full time staff taking care of the property maintance will be more and more popular. Some communities also provide walking paths and swimming facilities to make the community more attractive to active retirees.

For office and retail uses, the new trend is to move gradually from centralized offices in downtown high-rises to multiple branch offices spread throughout other metropolitan areas to better serve the community. For example, most banks have their head offices in downtown areas, but their branch offices are located throughout the communities they serve to provide convenient access for their customers. Schools, colleges, and hospitals are also following this trend. For example, UCF and Valencia College have their main campuses and also have several campuses located in different parts of the community. AdventHealth has their main hospital, and also spreads a number of smaller hospitals and healthcare facilities in different regions within the community. CVS and Walgreens and grocery stores like Publix and Walmart use location patterns and programs to locate their stores to provide convenient service to every portion of their communities. Now days, huge malls are not as popular as in previous times. More and more retail businesses want to locate their stores close to the residential areas.

How will these huge malls and commercial centers function in the future? I believe that these centers will need to combine entertainment, dining, hospitality and shopping services in one location. For example, some shopping centers build large musical water fountains. While the customers are shopping, they also enjoy the entertainment. Some shopping centers build carousels and children play centers to entertain children while their parents are shopping. Some shopping centers also provide high quality restaurants and food centers. Besides of these new trends, close proximity to hotels and theaters will also be the trend for future shopping centers.

More and more grocery stores and shopping centers now provide food services. The future trend of grocery stores will be more like the Whole Foods store I visited in Nashville, Tennessee. They have high quality take-out food prepared and tables where you can sit to eat a meal, drink coffee or enjoy your favorite ice cream. After you satisfy your stomach needs, you can go shopping in the grocery store for some necessary daily items. I also see more and more grocery and pharmacy stores add aisles for clothing and other retail items like Walmart. This combination of restaurants and shopping is not a new idea. Cracker Barrel always has store in the front and restaurant in the back. The food center and grocery store combination will be more and more popular in the community in the future.

Industrial and office buildings must adapt to utilize the new technologies which are developing so quickly. People now use Zoom meeting, Google meeting, etc. You can use high quality video to see the merchandise in three dimensions and inspect all of the details. You can also talk to the customers face to face online. These technologies provide more opportunities for people to do business and shop online. The mixed-used buildings, with office or display/sales rooms in the front and a warehouse in the back, are more popular in the industrial buildings. These kinds of warehouses are more popular for flooring, construction materials, lighting, and kitchen facilities. I do not see too many clothes or jewelry store and warehouse combination buildings in America, but I saw some jewelry and clothes stores and warehouse combination buildings in Canada. These buildings have the clothes, shoes, or jewelry store in front of the warehouse. Most are wholesale businesses, but now they have retail and online sales as well. Because more and more businesses focus on online sales, these store and warehouse combination buildings are getting more and more popular. Gas stations are a kind of industrial building. In old times, most gas stations only sold gas. However, now days more and more gas stations are combined with food convenience stores. Some of them even sell takeout food. They are serving gas as well as providing food and other merchandise for their customers.

Real estate is like the fashion industry. Trends are constantly changing over time according to the consumers’ needs. To serve their customers better, multifamily buildings provide more amenities; retail grocery centers provide food service and shopping combinations; shopping malls provides more entertainment and shopping opportunities. More and more stores, shopping centers, and office buildings are being located close to residential communities in order to better serve the communities. Now I see that traditional shopping malls have dentists’ offices, medical offices, pharmacies and restaurants besides the stores you normally see at shopping centers. Commercial real estate provides more and more convenience to meet their customers' living, working, shopping and lifestyle needs for the future.

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