We have been closely monitoring the commercial real estate industry performance this past year and half through the pandemic. While we have seen a variety of industry impacts as a result of the pandemic, it looks like we truly are seeing the light at the end of the tunnel now. Continue reading for some good news about the economy rebound.
Investing in commercial real estate continues to be a smart idea as we emerge from the pandemic. Overall, we are seeing the economy improving due to job openings, consumer confidence and pent-up demand from this past year. But what does this mean for commercial real estate? Well, monthly rent and other monthly incomes have helped the industry stay afloat during the pandemic, even when times were volatile. These sources of cash flow have outperformed stocks and bonds, which are subject to daily changes. The current rise in rent and occupancy rates are only boosting these returns.
On top of this, we have also seen a drastic slowdown in retail store closures. We saw a record number of closures in 2020 due to pandemic restrictions. Although, as numbers are changing and places are opening again, all signs point towards a retail market recovery. If trends continue, there will only be 42 million square feet of store space closed this year, which is the lowest annual total for over a decade. Not only has there been a dramatic decrease in store closures, but there has been a dramatic increase in store openings! Again, if trends continue, there will be more space opened than space closed in 2021!
Real estate seems to still be an attractive and safer investment strategy compared to stocks and bonds. Long term, CRE returns tend to rise as rental rates rise. Whereas interest income from investments in bonds are subject to change due to inflation. One tip we have for commercial real estate investors is to cultivate a diverse portfolio of assets and property types. This provides you with more security if one industry were to slip behind the others.
If you have any questions about the economy rebound or need some advice for investing in real estate during this time, give us a call! As always, keep up with our blog for more updates like this!