What’s Shaping the 5-Year Commercial Real Estate Outlook?
Demographics Will Fuel Space Demand Across Property Types
- The U.S. has some of the most favorable demographics in the world, with over 70 million Baby Boomers, Millennials and Gen Zs
- Baby Boomers are fueling medial office and seniors housing demand, while Millennials and Gen Z spur demand for rental and owner-occupied housing
- Retail and industrial demand also supported by spending across generations
Construction Activity Faces Long-Term Slowdown
- Elevated construction costs will inhibit substantial supply additions across each property type over the long-term
- Key factors driving rising construction expenses include the high cost of debt capital, rising materials and labor costs, rising land costs and increased administrative fees
- The construction slowdown amid positive demographic gains is expected to bolster the financial performance of real estate assets in the years to come
Capital Flows Into Commercial Real Estate Remain Strong
- Real estate capital flows have steadily increased — 2007’s initial-record deal count was exceeded in 2014 and has been surpassed in every year after
- Increased CRE data availability, professional management, lending liquidity, and the emergence of broad-based syndication have helped make commercial real estate a more mainstream investment option
- Aging Baby Boomers and the Silent Generation will transfer an estimated $84 trillion to younger generations, likely sparking additional capital flows into commercial real estate investment
*As of 2024
Sources: Marcus & Millichap Research Services, U.S. Census Bureau
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