The Best Real Estate Deals for 2020
While the underlying fundamentals remain solid for the commercial real estate sector this year, some asset classes look better than others.
Low unemployment has propelled "household formation" for many Americans. And multifamily vacancy rates are hitting 20-year lows despite record construction levels.
"Workforce housing--particularly Class C properties--is poised to outperform in 2020 as much of the new housing demand will be concentrated in the most affordable segment of the market," according to John Chang, SVP and national director of research services at Marcus & Millichap.
Chang has found that the supply of Class C apartments has been shrinking due to remodeling an upgrading these so-called "value-add" properties to attract higher rents and more upscale tenants. Thus demand for more affordable accommodations is rising fast.
A second area of opportunity this year will be service-based retail, such as restaurants and health and wellness-based businesses like fitness centers. This is due to the ongoing rise in disposable income and the rapidly developing careers of millennials now in their 30s.
As for multi-tenant retail properties, such as strip centers, vacancy rates have stabilized below pre-recession levels near 6 percent overall, Chang says, with development "likely to remain muted."
Chang also expects hotels to outperform the market and remain strong in 2020 after exceptional performance in 2019. Why? There has been a notable uptick in both business and leisure travel, particularly by millennials who are drawn to travel experiences they share on social media.