We sat down with JLL Florida Research Manager Marc Miller to hear his thoughts on the trends that he believes will shape the commercial real estate industry in 2017. Here is what he said to keep an eye out for in the year ahead.
What are one to two trends that you predict will be the biggest to shape the CRE industry in 2017?
The growing trend toward next day/same day delivery will have a profound effect on Florida’s industrial sector in 2017. E-commerce tenants will seek out smaller warehouses that are in closer proximity to large population centers (including in downtown areas where rents are much higher to service next day/same day deliveries for those markets. A good example of this is the one-million-square-foot lease that Walmart recently inked in Central Florida. The facility is in Polk County along I-4 and will strictly handle regional e-commerce deliveries.
As for the office sector, the relative slowdown experienced toward the tail end of 2016 will continue into 2017. A tightening and more expensive marketplace may slow growth for Class A office space, which in turn will benefit the Class B/A- segment. Given the uncertainty surrounding monetary/fiscal policy from Washington, continued turmoil in closely-tied Latin American markets, and general economic sentiment that expansion is coming to an end, 2017 could likely be the last year of modest strengthening in the office market. Annual job growth is expected to slow over the course of 2017 compared to what we’ve seen in the past, which should put downward pressure on leasing activity, particularly expansions.
What will be the biggest disrupters to the CRE industry in 2017?
The increase of technology in commercial real estate is historically slow to adopt new technologies, but that traditional mindset is quickly shifting. JLL, for example, has been laying the ground work to ramp up on new platforms that increase efficiency, productivity, and revenue generation. Proprietary technologies such as JLL’s Blackbird allows brokers to present dynamic three-dimensional presentations to survey specific markets from a true aerial perspective anywhere in the country. It dramatically reduces our clients’ travel and time costs with virtual visits to selected submarkets, helps effectively identify most profitable locations for a company’s expansion or relocation needs, and it encourages collaboration, trust and consensus to make informative real estate decisions. As 2017 progresses, this embracing new technologies should become common practice throughout the commercial real estate industry.
What skyline-shaping projects are rising in Florida that will have the biggest economic impact in the coming year?
MiamiCentral Station, a transit hub for the new statewide Brightline train service, is set to become a defining landmark in the downtown Miami skyline, and should be delivered next year along with a myriad of condo/multi-family projects that are currently underway in the area. There are also talks of office development in Downtown Fort Lauderdale, which would introduce over 500,000-square-feet of new office supply to the region. In Central Florida, Creative Village in Downtown Orlando is on track to begin construction in 2017. The $1 billion project will be one of the largest transit-oriented developments in the Southeast United States.
Which CRE sectors will see the most growth in 2017?
Industrial should continue to thrive in Florida. The retail market should remain stable and continue to improve, especially since several major retail developments have completed in Florida this past year. The office market will likely continue to cool down; while activity will be positive it won’t quite match the highs of recent years.