Foreign investors have been bidding up the price of commercial real estate, especially in the large gateway cities of California. Los Angeles and San Francisco have been the scene of large influxes of foreign money for industrial properties, accounting for a large portion of the $61 billion spent by foreign real estate investors in the United States since 2010. The competition created by deep foreign pockets and large institutional investors has often priced high-net-worth individuals and families out of these markets. However, opportunities still exist for smaller players in the secondary and tertiary markets away from the high-profile urban centers.
Business owners in California and around the country sometimes find themselves committed to commercial lease agreements that no longer fit their needs. Entrepreneurs may wish to break their leases because their businesses have grown and need more space, or they may be seeking an exit due to an unexpected downturn and a pressing need to reduce costs. Breaking a commercial lease can be straightforward or difficult based on the landlord involved, the market conditions and the state of the economy.
Nearly a decade after the Great Recession, commercial real estate investors in California and elsewhere should know that banks are making loans. If banks are not making loans in a given area, alternate loan opportunities may exist. Banks are largely lending because of foreign demand as well as a demand for apartment space. Low interest rates are also playing a key role in their willingness to make loans.
Commercial real estate trends in 2018 may influence how California residents or others choose to invest their money. According to the chief economist for the National Association of Realtors, the overall outlook for commercial real estate in 2018 is positive. However, there may be a bit of a deadlock between buyers and sellers in some cities. This is because landlords and sellers will want higher rents or purchase prices because of the economy's overall health.
The effects of climate change, such as rising sea levels, are likely to have a significant impact on the way people in California live and do business in coming decades. As sea levels continue to slowly rise, commercial real estate investors and developers could face new challenges when trying to obtain financing for projects in areas that may become at risk for flooding.
Indoor shopping malls in California and across the United States can experience tough times when retailers close. Even in bustling areas and popular districts, malls could have empty spaces that last for months as contracts with large retailers can take months to complete.
Stakeholders in the California commercial real estate industry have long been about adopting technology. Despite the slowness of commercial real estate brokers to embrace technology, some are now starting to understand the value of using what it can offer.
Commercial real estate markets in California and around the country should continue to provide investors with solid and steady returns in the months ahead according to figures released by NAI Global. The New Jersey-based brokerage firm came to this conclusion after studying vacancy and rent trends in 21 major U.S. markets. According to the company's second quarter assessment, vacancy rates in the industrial, office and retail sectors are hovering near or at lows not seen in years, and rents continue to increase in most markets even in the much-maligned retail segment.
A buyer considering a purchase of commercial real estate in California will have many details to consider before committing to a deal. In general, a seller should grant the potential buyer a period of time to conduct due diligence. This investigative period allows the buyer to weigh the asking price against factors that influence value and liability. Essential issues to check include the status of the title, zoning, compliance with environmental regulations, cash flow and lease agreements.
According to forecasts from the National Association of Realtors, commercial real estate vacancies are expected to fall about 1.1 percent to 11.9 percent. The industrial sector is also set to experience a 1.1 percent fall in vacancies to 7.8 percent over the coming year. Vacancy rates are also expected to fall in the retail and multifamily sectors of the commercial real estate market as well.