What’s Ahead for Commercial Real Estate in 2014?

Image Source: garywkfung

Image Source: garywkfung

The real questions on the minds of commercial real estate investors are:

  1. How will 2014 play out?
  2. What areas and sectors should attract the most capital?

Bloomberg News recently reported that 451 funds were actively raising $150 billion for real estate investment in the first quarter of 2014, which is almost twice the dollar volume of 2013. Of 500 global investors, 25% of which manage in excess of $5 billion, 70% proclaimed they would be expanding their portfolios this year. So where will it go?

One forecast predicts Canadian investment in U.S. property will continue to surge in 2014. However, with U.S. investors overwhelmingly being the most bullish on international investment this year, Canada is expected to be a major beneficiary of this trend. In fact, Google reportedly just signed a lease for 185,000 square feet of space in Canada. This monumental move backs up claims that Canada is set to lead the tech and entrepreneurial front ahead. In terms of where to invest in Canada, the Real Estate Investment Network (REIN) has named Alberta the forerunner.

A major 2013 annual review of North American commercial real estate shows Edmonton’s retail property vacancy rate dipping under 2% last year. While there are over 40 significant retail projects underway in Edmonton, the market is expected to remain very tight for the next few years as the new buildings are constructed.

There is a lot going on in Edmonton and the retail growth is a major component of the city’s development. However, leading experts have dubbed “Generation Y as the singular most dominant trend for many years”. Multiple studies and surveys suggest that Generation Y isn’t really big on driving and prefers urban living, with a priority placed on walkability. From a commercial real estate investment standpoint, this indicates some of the biggest opportunities in 2014 and beyond may be in local shopping plazas, which will serve this growing demographic sector.