Taxes and Technology Defining Commercial Real Estate Trends

  • David Passman
  • 07/27/18
 
The release of the ninth annual Akerman US Real Estate Sector Report means commercial realtors can now take a peek into data and trends that will define the industry for the next few years. While the report is filled with interesting information, the most informative bit of news this year is that tax reform and technological advances are set to define the commercial real estate sector in the near future.

With nearly half (48%) of respondents citing technological advancements as a defining factor in the trajectory of commercial real estate over the next three years, technology is obviously at the forefront of the minds of many industry leaders. Recent technological advancements, like virtual reality and drones, are already penetrating the commercial real estate landscape. Other technology trends expected to make an impact on the industry include the integration of the Internet of Things into management systems, data mining, and the use of blockchain to replace real estate title transactions.

The Tax Cuts and Jobs Act is also projected to have an impact on future commercial real estate transactions, but respondents saw these tax changes as a secondary trend in the sector. Forty-two percent of survey takers said they believed these tax changes would be a critical factor in the future of the industry. The most extensive rewrite of U.S. tax code in more than 30 years will likely benefit some real 
estate sectors more than others, forcing some investors to rethink their commercial real estate strategy moving forward. 

In spite of these trends, the report offers an optimistic note. Nearly 70% of investors and executives are optimistic about market activity this year. That’s a huge 25% jump over last year’s numbers.

The information in the report was gathered by law firm Akerman LLP, which has been tracking commercial real estate trends for nearly a decade. The firm captures the thoughts and trends that company CEOs and industry executives deem most important for the year and packages that data into a comprehensive analysis of the commercial real estate sector. Their annual report includes an outline of key market conditions, investor trends, drivers of growth in the industry, and capital availability.

Other interesting trends gathered from the report include:

  • Multifamily developments are on the rise. More than 60% of respondents said the most active real estate market segment is multi-family homes.
  • Job growth will have an impact on the market. Most executives surveyed (66%) believe the country will see significant job growth in the near future, which could have a positive impact on the commercial real estate market.
  • The economy could slow industry development. Nearly half of respondents are concerned that rising interest rates could impact the U.S. economy, which will also slow development in the commercial real estate market.
  • An aggressive pursuit of US assets by foreign investors. Respondents believe that foreign investments in US commercial real estate is at an all-time high, with a number of foreign investors hailing from Europe, Brazil, and Mexico.
  • Future funding will come from private equity and banks. While 57% of survey participants say private equity will be the main source of funding for commercial real estate purchase this year, 48% of respondents say banks will be the leading provider of funds.



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