Find out how technology has helped savvy investors discover hotspots like San Francisco and Seattle — before prices skyrocketed.
The ability to accurately detect a future CRE hotspot is highly dependent on how much information is available to the investor in question. Urbanization and shifting demographics will always be key factors, influencing where people want to work, where they want to live, and what kind of property will fit their needs — but predicting how these factors will play out before they occur is an intricate process.
The democratization of information has both complicated and streamlined access to CRE data. Every location has its own systems and rules by which CRE data is stored, organized, and digitized, which has empowered commercial real estate brokers and investors to accelerate their market research processes and bypass the time-consuming ordeal of hunting down a property owner. But while there may be plenty of data newly available, the quality of that data is important — and collecting, organizing, and analyzing it requires the right CRE tech tool.
When choosing a commercial real estate data platform that will best suit your investing needs, it’s important that you identify what specific information will enhance your ability to identify future CRE hotspots. Let’s take a look at four key factors that every investor should take into consideration when identifying areas primed for commercial growth:
There’s All This Data — But What Info Do You Really Need?
1. Corporate Growth
Corporate growth is a huge indicator of a real estate market’s health, and can often be spotted early by foreign investors. Seattle’s commercial real estate boom, for example, was fueled by foreign investment, in large part due to the presence of large corporate entities like Amazon, Microsoft, and Starbucks. In fact, six of Amazon’s building complexes in Seattle have sold for a combined $1.5 billion in the last 13 months, mostly to foreign investors.
Be aware of rapidly growing corporations in certain regions, as well as existing entities that may be looking to open campuses in new locations. Not only will the companies themselves — depending, of course, on the health and sustainability of their business model — likely expand with the potential to lease progressively larger properties, but they will also serve to alter the city’s market conditions, increasing the value of other commercial properties in the area and enticing owners to sell.
Uber and AirBnB, for example, recently expanded their offices to Seattle, enticed by the city’s talent pool — attracted and maintained by the three aforementioned corporate giants — as well as the city’s affordable prices compared to cities San Francisco (prices that are unlikely to last much longer).
2. Income Growth
Tied to a region’s corporate growth is its income growth. For instance, Seattle has the fastest population growth in the country, with an astounding 3.1 percent population increase from 2015 to 2016 alone. Much of this growth can be attributed to the rapid increase in high-paying jobs in from the city’s growing tech sector. Coupled with this wage and population growth is an increase in property demand and a surge in property value.
3. Market Fundamentals
Strong market fundamentals — low interest rates, steady rental growth, and rising property values — indicate a market primed for investment, and each contributes to increased lending activity in a given region (as investor activity increases, so too does the demand for loans to finance said investments). High lending activity is generally a sign of a healthy market, indicating a strong financial landscape for future investment.
4. Mortgage Maturity Dates
Low interest rates also incentivize borrowers to refinance their maturing loans in order to lock in lower rates. When a loan is set to mature, investors are likely to refinance with long-term loans to secure favorable rates. For instance, if multiple properties in a densely populated urban area with low unemployment rates are due to mature, it may be a good time to invest or refinance. If, on the other hand, numerous properties in a small town with declining income have upcoming mortgage maturity dates, it may indicate an upcoming market downturn. It’s important to pay close attention not only to the mortgage maturity date of properties in which you might be interested in investing, but in the mortgage maturity of surrounding parcels.
Looking for up-to-date, comprehensive commercial real estate data? Reonomy offers CRE professionals real-time access to the data points they need to grow their business — from debt and sales history to zoning and building owner information. Try Reonomy National for free today.