Part 1: Challenges – and Opportunities – Will Always Exist

Is the U.S. economy still on the rise, slowing or heading toward recession? Take your pick, because no one seems to know for sure. With predictions varying with each new report, uncertainty appears to be the only true constant.

For instance, the Federal Open Market Committee projects a slowdown in 2019 even though the GDP is still expected to increase by 2.3 percent. The Dodge Data & Analytics’ 2019 Construction Outlook predicts about $800 billion in new construction starts this year, staying essentially even with 2018 spending.

For those who prefer facts over projections, we suggest a look at current market fundamentals.

As reported by BISNOW, “industrial real estate demands are soaring to new heights,” with CBRE Head of Industrial Research David Egan expecting a continued trend. “There has been a general expectation for a number of years that this can’t continue, and it turns out that hasn’t been true,” he told the publication. “We have a massive amount of demand on the market for logistics properties of all types…My expectation in 2019 is that we should see more or less of the same dynamic.”

On the local front, New Jersey’s industrial vacancy dipped to just 3.3 percent at the close of 2018, a drop of 20 basis points year-over-year according to CBRE. Further, annual net absorption reached 11.6 million square feet – the highest recorded by CBRE since it started tracking in 2001. The state’s prime location in the northeast corridor has coupled with increased demand for e-commerce fulfillment to create sustained momentum here.

This bullish sentiment was also confirmed for the office sector in CBRE’s 2019 Office/Occupier Outlook Report. This includes an expectation of “37 million sq. ft. of net absorption in 2019, marking the 10th-straight year of positive absorption.” Another bold prediction is that “flexible space offerings could account for 10% of Class A space by 2028.”

Here in New Jersey, office fundamentals remain somewhat mixed, though several indicators showed good progress in 2018. For example, at 1.6 million sq. ft. of net absorption, the market recorded its highest annual total since 2005, according to CBRE. And average asking rents were $26.45 per square foot at year-end – the second-highest rate since the beginning of 2002.

The Keys to Not Only Survive, But Thrive

Regardless of industry fundamentals, challenges – and opportunities – will always exist for the developers, owners and operators of commercial real estate. Even in the best of times they must stay ahead of the game to secure and retain tenants, while creating operationally efficient properties. The ability to transition and upgrade processes are the keys to not only survive, but thrive in any market cycle.

Consider technology, which is playing a more pivotal role today than ever before in the quest to gain efficiencies and bolster the bottom line. And there is no better time than when profits and fundamentals are strong to capitalize on the latest innovations.

Within this context, many commercial real estate firms are recognizing the advantages of today’s digital world, and the evolution of fully integrated enterprise resource planning (ERP) solutions that provide data on everything from tenant payments to maintenance schedules in real time.

This trend was recently highlighted by Deloitte in a report stating “new business models and competition, extensive use of technology, and changing tenant and investor expectations are redefining the commercial real estate (CRE) industry. As investors increasingly favor newer business models and the tech-enabled ecosystem, companies in the commercial real estate industry will have to realign business priorities and adapt to new demands. The most agile will win away customers and top talent – along with investment dollars.”

Next up? A discussion about the advantages of industry-specific ERP solutions.

IBS can help you assemble the best possible CRE technology solution for your firm. For a free system analysis, call 973-575-4950 or email sales@ibsre.com.