Recent Trends in the Urban Real Estate Market
Over the past year, the property market has seen a swift uptick in major cities. After the bubble burst in 2008, many investors withdrew from investments and construction on new projects came to a screeching halt. Development stalled and both commercial and residential real estate prices plummeted. Today though, especially in major urban centers, commercial prices are rebounding.
Read on for common trends in today’s market and learn about some distinct differences in the commercial realm versus the residential in 2013.
Homeowners were hit the hardest during the collapse because their property lost virtually all value and many could not afford to pay for the home they had “bought” in previous years. In comparison, multi-family properties (rental apartments) were not hit as hard during the crash for two reasons. First, tenancies stayed more stable (people have to live somewhere, and many were foreclosed out of homes and moving to apartments); and second, interest rates dropped very low, which caused the price of income-generating properties to rise. Residential (i.e., homes as opposed to investment properties like apartments) has recovered very strongly in many markets, mostly in the last few years.
In many cases, commercial properties in major cities were hit harder than residential real estate during the recession. One issue was due to the fact that many workers were laid off, businesses went bankrupt, and companies in commercial buildings were no longer able to pay the rent. As companies went under or stopped expanding, this increased vacancy rates and hurt property owners.
Ultimately, it’s hard to generalize so broadly because different product types have recovered differently, and in different cities. For a more in depth overview, we would need to analyze specific markets and specific asset types. Leading companies in commercial real estate like FLH Company have analytical software that guides them towards savvy financial decisions, but oftentimes the smartest investments come down to intimately knowing a neighborhood, and instinct.
Those just starting out in the world of property ownership should do their research and study the trends. Look to those like Franklin Haney who have had success with real estate in the past and learn from them. Depending on the anticipated time line for economic recovery, it could be wise to invest in commercial over residential to maximize a return on investment.