3 Trends for the Real Estate Industry in 2018

As we close out the first month of the new year, it may be a good time to evaluate the prospects for the real estate market. Overall, the real estate industry continues to trend in a positive direction, benefiting from a historically long economic expansion period. Will the market continue its growth phase or will we see a downturn in the industry during 2018?

Here are three trends you may see this year:

1. Multifamily sector—Many believe the multifamily sector hit its peak in 2017 amid overbuilding concerns. However, we expect to see continued strong construction activity and delivery of a high number of units throughout the year.

The desire of millennials and empty nesters to rent remains strong. Additionally, available amenities in new construction have made apartment living attractive to many. Another factor resulting in increasing demand for renting comes from the new tax legislation, which reduces some of the benefits of home ownership by placing limitations on property tax and mortgage interest deductions.

One challenge for the sector could be the availability of financing, as many lenders may have a reduced appetite for multifamily projects due to a high concentration of apartments already in their lending portfolios.

2. Housing market—The single family housing market had a strong year in 2017 and there are positive trends that will influence this market in 2018. A strong job market, continued attractive mortgage rates, and the new tax legislation, which is anticipated to spur economic growth, are all expected to have a positive impact on the housing market. Additionally, there continues to be low levels of housing inventory for existing home sales, creating demand for new construction.

An increase in the cost of building materials and construction labor shortages may negatively impact the market; however, expect builders to remain confident and continue to build to keep up with buyer demand throughout 2018.

3. Industrial sector—As e-commerce activity increases, the industrial sector continues to shine. There is strong demand for warehouse and distribution centers in strategic locations that are accessible to highly populated urban areas. Significant construction and development activity is expected in 2018. Investors continue to flock to this asset class and financing availability is expected to be very strong throughout the year.

While not all sectors are performing well (retail and certain office segments have recently struggled), the outlook for the industrial and multifamily sectors, as well as the single family housing market, remains strong for 2018.

John J. Helmuth, Jr. can be reached at jhelmuth@kmco.com or 215.441.4600.

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