With property values at all-time highs, unemployment at all-time lows and the stock market still holding strong, the question on everyone’s mind is where we go from here.
Everyone has their own mindset of the current commercial real estate (CRE) market and where it is headed but nobody knows or can predict what’s next. The reason is that the world is extremely different today than it has ever been.
It boils down to one thing–evolution.
The world is now connected globally and has evolved with the click of a button. Opportunities now exist that have never existed before. Companies such as Uber, Etsy, Door Dash, and of course Amazon require supply chains that create jobs, infrastructure and almost all in some way correlate to the commercial real estate market. Technology has permanently reshaped the globe throughout every industry and this will not change anytime soon.
Regardless of these positive factors, the US will have one current event that will take center stage over all others.
The upcoming presidential election. During election years, real estate and investment transactions slow down and money has a tendency to sit on the sidelines. Expect nerves to cause a pause or a slight pullback starting in second quarter of 2020 due to the uncertainty of future unknown regulations.
During all election cycles since 1928, there have been 3 times during the election period that the stock market went negative. Home valuations have averaged 1.5% less in price gains and CRE investors tend to go with the “wait and see” approach. This same trend will most likely continue for 6 to 18 months and should balance itself out once all of the dust settles.
We need to prepare for a lot of volatility over the next 1 to 2 years, however history has showed a gradual, but consistent increase in profitability since the beginning of time. If I could provide a few words of wisdom–don’t panic, stay positive and enjoy life. We live in the greatest country in the world and we will always prosper.