Crosstown Commercial / March 30, 2022
With the first quarter of 2022 already behind us, it’s time to look at industry trends and anticipated opportunities and challenges for the remainder of the new year.
After a relatively strong decade, the commercial real estate industry suffered some apparent setbacks in 2020. Having held steady and strong since the recession of 2008-2009, the pandemic creates a variety of unanticipated setbacks. However, with cases of COVID-19 on the decline and more people getting back to work and resuming their spending, the commercial real estate market is again on the trajectory towards a bright and promising future.
Real Estate Trends to Keep Your Eye on in 2022
1. The multifamily market will recoverAlready seeing improvements, we anticipate that the multifamily and real estate markets will continue to prosper and grow throughout the remainder of the year. Vacancies will continue to lessen, and we expect that levels will soon resume to where they were in 2019.
2. eCommerce will continue to rise, though many customers will return to brick-and-mortar locationsThough many consumers have embraced the convenience of online shopping, it still doesn’t compare to the in-store experience that allows a shopper to touch and feel or try before they buy. Retailers combatting the online competition pre-pandemic are more likely to persevere than those who found themselves in reactive mode once shut-downs forced by the pandemic became the norm. Those retailers that continue to come up with new ideas to draw in customers will be the true leaders, and other retailers will be sure to follow suit.
3. Workers will continue to demand remote and hybrid work opportunitiesTraditional office spaces may be at higher risk than those that have embraced a hybrid or remote work model. Today’s workers have proven that they can be successful in a work-from-home environment, and many businesses have prospered with the help of employees that have risen to the occasion. Employers that continue to embrace and encourage hybrid work environments will be the winners, and many will look to lease smaller office properties across the U.S. as they also use hybrid work as a recruitment and employee retention strategy.
4. Coastal recoveryWith hybrid and remote work becoming a must for many employers through the pandemic, workers found themselves with a unique relocation opportunity. As employees learned they could work anywhere without a negative impact to the business, they took to the road, moving to U.S. hotspots such as Nashville, Austin, and other centralized non-coastal cities. Despite this moderate exodus, multifamily properties in New York City, Los Angeles, and other large coastal cities saw a return to pre-pandemic vacancy levels as 2021 came to an end.
5. The Missing MiddleAn unanticipated trend coming out of the pandemic is the lack of workforce housing for middle class households such as those with teachers, law enforcement, and other emergency-related personnel. Municipalities will need to consider marketing and incentive strategies to enable the development of more workforce housing. This may require a draw on public-private partnerships.
6. New and improved rental unitsWith the housing market continuing to boom and home owners finding themselves in bidding wars from want-to-be buyers, the cost of single-family homes has risen exponentially. This has created a demand for larger, higher-end rental units. And, there is an additional trend of pre-pandemic renters that have looked for new, improved, and larger rental units that provide an office space separate from sleeping and living spaces.
Opportunities in the Commercial Real Estate Space
1.Mixed-income housing developments and markets Public-private partnerships will need to play a vital role in increasing the number of affordable workforce housing units while also helping to increase housing density. Mixed-income housing developments that offer a combination of market, workforce, and affordable rates all in one location will be vital to increasing the affordable housing supply.
2. Upgraded technology Owner-operators will need to embrace digital rent collection solutions. With the growing trend for online payments, it only makes sense that tenants will want online options to pay their rent and service fees. Resident-driven demand for electronic payment and communication options will continue to grow for the foreseeable future.
3. Enhanced infrastructureWith so many workers embracing remote and hybrid work environments, those making their way into a physical work location will be looking for shorter commutes. On top of that, eCommerce shoppers will want quicker deliveries, and the economy can anticipate improvements as shoppers shop more with anticipated speed to market. These infrastructure enhancements should focus on accessibility and convenience, which will translate into desirability for employers and households.
Commercial Real Estate Priorities for the Balance of 2022