Thanksgiving is right around the corner, followed closely by 2015. While it is not quite time for critics’ and pundits’ top 10 lists to come out, commercial real estate brokers are already gathering to discuss how Philadelphia’s market is doing and what the city should expect next year.
These things always remind us of the State of the Union speech. We imagine a high-profile agency head standing up in front of a room full of brokers and agents. She pauses, smiles, looks down at her notes one last time, and says, “My fellow real estate professionals, I am proud to say that the state of the market is strong.” The crowd cheers.
This year, at least, it’s true. During the Great Recession, industry leaders had a hard time putting a positive spin on market reports. “Things aren’t as bad as we thought they would be.” Or, “The state of the market is … changing. Yeah, changing.”
Forecasters at CBRE Inc. would agree that the market will change in 2015, but they are more optimistic than anyone was in 2009 or 2010. The recovery has taken hold, and Philly’s office, industrial, retail and multifamily markets will see more activity and slightly higher rents.
In the office market, businesses will continue to adapt their workplaces to the millennial lifestyle, according to one CBRE expert. That means looking for locations closer to rail or within easy walking distance from workers’ homes. Businesses will also look for sites with more amenities.
The retail market continues to adapt to the bricks-and-clicks business model. Store owners are looking for smaller spaces that will help them maintain a presence in the community but will not be a drain on resources. Finding the right balance between Internet presence and physical presence will continue to drive retailers’ decisions.
For industrial properties, CBRE predicts landlords will increase rents and add amenities to existing sites and new developments. Tenants will look for space in smaller developments.
Finally, the multifamily market will continue its momentum. Rents will continue to climb, and new developments in Center City as well as the suburbs will have no trouble finding tenants.
Overall, then, Philly’s commercial real estate market is changing, but the change is good. The state of the market is strong now and should be strong in 2015, too.
Source: Philadelphia Business Journal, “Reading tea leaves: CBRE makes commercial real estate forecasts for next year,” Natalie Kostelni, Nov. 5, 2014