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Overbuilding concerns in commercial real estate

On Behalf of | Sep 26, 2016 | Commercial Real Estate |

Commercial real estate investors in California may have a better idea about where and when to invest if they stay up-to-date on new construction trends. When a certain market sector overbuilds, rent prices in the area will likely decline.

Because new apartment construction as significantly increased in 2016, some real estate experts are worried that there could soon be an excess supply of apartments. According to RentCafe, there were 320,000 new apartment units built nationally in 2016 compared to just 200,000 in 2015. New hotel construction is also leading to overbuilding concerns as the number of hotel projects has increased by 32.6 percent since 2015.

There are also some concerns about overbuilding of office space; however, many real estate experts think that the rising vacancy rates are only temporary. As more startups are created, the empty office space will be filled. Overbuilding is not a concern for the industrial real estate sector because demand is still ahead of supply. Demand for industrial space could be partially due to the success of e-commerce businesses and the need for logistics facilities. Brick-and-mortar retail space is not suffering from overbuilding problems, but the industry is experiencing a lot of store closures.

A commercial real estate investor who wants to develop a property may want to look at new construction data to determine what type of commercial buildings are most in demand. An attorney may be able to help a real estate investor resolve complicated legal issues such as zoning problems or contract negotiations.