In 2020, retail real estate will continue to shrink. Second, private investment will aid the building of more affordable housing. Finally, interest rates will remain low and tech will continue to play an increased role in real estate.
Retail Real Estate
Recently, Pier 1 Imports reported that they were planning on closing 450 stores. This announcement falls on the heels of a devastating year for retail real estate with several bankruptcies and accelerated store closures. There is nothing to suggest that this trend will reverse itself as brick-and-mortar retail companies continue to face pressure from online retailers such as Amazon and Walmart.
With the closing of Sears and JCPenney, mall operators are having to come up with creative solutions for finding tenants such as using space for gyms or entertainment venues.
More Private Investment in Affordable Housing
There is an affordable housing crisis in the US. With the recent changes to Opportunity Zone regulations, several private equity investors are poised to begin building in those zones following a rush to buy spurred by the changes in the capital gains stepped-up basis from 10% to 15% if the investment occurred prior to December 31, 2019. Although the rules do not require developers to build affordable housing in the zones, there are federal grants available for builders and developers to do so.
Interest Rate will Remain Low
Many measures point to a robust economy. For example, unemployment is low. Gross domestic product is positive and continuing to improve. And, most importantly, wages seem to be finally increasing. Typically, these signs would point to the FED raising interest rates; however, it seems as though this FED is on the move to do just the opposite. So, based on the FED’s practices in 2019 of not raising, it’s safe to say that they will continue to ease and allow businesses to borrow and flourish.
Technology will also continue to play an increased role in the real estate buying, investing and selling experience. There are several companies that will begin raising more funds in order to expand into more markets. These are companies like Knock and Opendoor. Also, virtual tours will expand.
With all of the changes and the changing marketplace, the overall mood seems to be that technology is continuing to change the real estate industry.