The commercial real estate market has come a long way since the financial collapse that began in 2008. It’s been a slow but steady climb, and most every geographic area is doing better now than it was back then.
When everything began dismantling, financing became harder to get, and this greatly added to the problem. But in recent years financing has been getting progressively better and has become even more available, giving many people real estate a much greater feeling of confidence. The good news, in addition to this, is that experts are now predicting that good financing will become even more available in 2015.
So what we now have here is a good, solid recovery based on good fundamentals, with any concern about a bubble occurring not being well-founded. In general, while sale prices have definitely been going up, they don’t seem to have risen to ridiculous levels. With this in mind, one of the greatest indicators of a real estate bubble is when people who have no real estate investment background start throwing their money into real estate…because of the amazing appreciation they’re seeing going on, and this really doesn’t seem to be happening right now.
In addition, energy prices have gotten very low, which is definitely helping out the overall economy. This is saving companies money in both manufacturing and distribution, and it’s putting more money into the consumer’s pocket, too. So all of this together is giving both families and industry more breathing room financially, which is helping to support the real estate market.
Three of the major factors that help to support real estate values are the state of the economy, the availability of financing, and energy prices. With this in mind, the state of the economy at the local within commercial level is more important than the state of the economy nationally, because what’s going on locally will have the greatest amount of impact there. In knowing this, the areas that have been focused on energy production have done extremely well in recent years while the price of energy has been high, and those areas may now have a tougher time when the price of energy is low. The profitability simply isn’t the same, and this will definitely have an impact on the local economy.
In predicting what will happen in commercial real estate in 2015, we’ll probably see a slow, steady increase in the total stability of the market. There is nothing really visible on the horizon right now indicating the possibility of a substantial economic downturn, and the increased availability of financing that’s been mentioned should help to support both the value of properties, and their appreciation.
However, any substantial reversal and increase in energy prices could get in the way of this, not just because of the increased out-of-pocket expenses to everyone, but because psychologically this could get people thinking that economic problems are now on the way.
One thing is for certain, though, and that is that people are now thrilled to be paying so much less now to fill up their cars at the pump, and this is definitely putting more spring into everyone’s step.
So in summary, 2015 is looking like it will be a continued positive year in commercial real estate. As long as energy prices continue to remain at current levels, and financing continues to become more readily available, both owners and investors will likely be very happy with what they’ll be experiencing during the year.