2015 CRE Forecast
As your Long Island commercial real estate industry experts, we at American Investment Properties have constructed a 2015 Forecasting Report on how we believe the Retail, Office, Industrial, and Multifamily Markets will behave throughout the year based upon our knowledge of recent market trends and our predictions on the health of the Long Island economy.
For the Retail Market, in 2014 we had seen vacancy rates hovering at around 5% as we began to watch the economy strengthen. We also experienced new business developments as there was a strong demand for retail tenants to occupy additional space. Our predictions for 2015 is that the Long Island economy will continue to thrive and therefore, vacancy rates will continue to remain low. As space on Long Island can be challenging, and there is only so much land to build new retail developments, we also predict that the rental rates will rise as demand for retail space continues to grow. Retail property is a great investment on Long Island – owners, developers and perspective owners are stepping into a very strong investment sector.
As we look back on the Office Market, we see that this was the highest hit market with vacancy rates in and around 10% for 2014. The Office Market appears to be the slowest to gain momentum after the nationwide recession. However, with Long Island’s economy beginning to thrive, we believe that this new economy growth should inspire vacancy rates to decline in 2015 as new businesses develop and grow creating a demand for tenants to occupy office space. Investing in office property typically has the highest risk, but also tends to have the highest reward. 2015 should be a strengthening year for Long Island’s Office Market.
In 2014, we saw that the Long Island Industrial Market had similar challenges to the Retail Market with the main problem being a lack of space. The vacancy rates for 2014 in the Industrial Market hovered at around 5% or at times even lower. As industrial space commands the lowest rents, people are now looking for higher and better uses for industrial space – think warehouse-like retail use or office space which will drive up the rental rates. Industrial space is currently at a premium in Nassau and Suffolk Counties with vacancy rates very low. Proving that this market specifically is very healthy. We predict that rental rates will continue to increase and vacancy rates will retain or decrease, as we expect to see a continued high demand and low supply in this market.
As for the Multifamily Market, in 2014 the vacancy rate ended the year at 4.3%; an incredibly low vacancy rate and the lowest of all the markets. As Long Island is not particularly Multifamily focused, this area of the market has extremely high demand the the lowest amount of supply, driving this market to maintain the lowest cap rates (highest prices.) We believe that we will continue to see this trend throughout 2015 as the demand for multifamily living space on Long Island will only grow. As for investing in the Multifamily Market, this is a very sure investment and most owners feel comfortable with owning multifamily property as it is a steady source of income.
As for interest rates, in 2008 the interest rates had been reduced due to the recession and have not increased since then. With our economy back on the rise, we foresee that by mid-2015 it is likely that interest rates will gradually begin to rise again.
Overall, this 2015 Forecasting Report urges us to acknowledge the growing and thriving economy on Long Island across all of the markets. We believe that 2015 will continue to be a healthy year for Long Island’s commercial real estate markets with rental rates inclining and vacancy rates declining. Purchasing property across Long Island’s commercial real estate markets is a strong and positive investment and we are eager to continue to watch our markets and investments succeed.