The demand for office space has leveled off in most California markets, and vacant stores are a familiar sight in many parts of the state. While rents may be flat across the Golden State as a whole, they have risen by 25 percent in Pasadena over the last 12 months according to real estate brokers. Industry experts say that the demand for space is being fueled by Asian investment, and reports indicate that land in the city is being snapped up by developers sensing an opportunity.
Rising real estate prices in California and around the country have industry experts and officials at the U.S. Federal Reserve worried. A sudden downturn in property prices that began in 2007 shook financial markets and sparked a worldwide crisis a year later, and fears that the same thing could happen again have led to calls for steps to be taken. The Federal Reserve took action in December by raising interest rates by 25 basis points, but a senior Federal Reserve figure believes that other tools should be employed to cool the property sector down.
According to the recently released America's Investor Intentions Survey 2017, investor confidence in the commercial real estate market in California and the rest of the United States is slightly more positive than it was in 2016. This comes in spite of the expectation of an interest rate increase. Some attribute the positive sentiment to an increase in economic growth and the reduction of regulation.
According to a Wall Street Journal report, commercial real estate deal volume dropped 11 percent in 2016. For investors in California or elsewhere, it may be a signal to start looking for other places to put their money. One reason why this may be a good idea is because of the new supply coming online now and in the near future. Extra inventory may place pressure on both vacancy rates and lease rates.
California investors who are interested in commercial real estate may benefit from learning how the technology industry is affecting the segment. The manner in which professionals in the industry conduct their business depends significantly on the advancements made in technology.
Commercial real estate markets in California and around the country will provide investors with steady returns in 2017 according to the National Association of Realtors. Some industry experts feel that the current market cycle is nearing its peak, but the real estate trade association does not foresee any major setbacks in the year ahead. The group says that smaller markets were particularly active in late 2016, which compensated for falling prices in some of the nation's larger cities.
While California boasts a prosperous economy, several states in the Southeastern part of the country have also been experiencing strong growth, largely due to the area's industrial expansion and its rapid employment and population increases. As an economic powerhouse, the region has had a growth rate that, if it were a country, could surpass the top five largest countries in the world.
In 2017, experts believe a couple of primary factors will affect the real estate market in California and in the rest of the nation. Rising interest rates are expected to affect the affordability of homes, and millennials are getting older and are buying homes.