At the beginning of the year we evaluated the projected commercial real estate industry outlook for 2021. As we are approaching summer, we thought it would be a good idea to reevaluate the current market trends and see how things are going. It is always good to evaluate industry news and trends to understand how each CRE market is performing. This helps in knowing what to expect and can also help you make educated decisions about your investments. Here are some of the latest commercial real estate trends happening in 2021.
Multi-family Properties Growing
Housing will always be a necessity and something people make a priority in paying for. And with having the lowest barriers to entry, the multi-family market is expected to continue to grow. While this is true, the growth might look a little different. People are still migrating from urban areas to the suburbs to take advantage of the extra space and cheaper rent. If you are considering investing in this type of property, you will want to check the demographics for the area you are looking at to make sure there will still be a demand. You can also check out one of our most recent blogs about the pros and cons of investing in multi-family properties.
Interest Rates Remain Low
The Federal Reserve has cut interest rates to historically low levels to provide the US economy with a stimulus. Fortunately, many expect these low rates to stick around until 2022 and possibly even 2023. This is good news for borrowers who have to access capital markets.
Suburban Migration
We have seen this trend for a while now with singles and families looking to flee congested urban areas. Now, not only are those people moving to less-populated suburban areas, but some businesses are too. There are a multitude of companies looking to migrate their offices to the suburbs to downsize, follow their employees and take advantage of lower occupancy costs. In some areas, this will leave vacancies in some areas that were once in high demand.
Steady Demand for Industrial Space
Industrial space has been in demand for some time now, and that’s not changing. As we saw at the end of last year, there was an increase in the demand for warehouse space as a result of online shopping during the pandemic. Consequently, the demand for distribution centers is rising. Additionally, many companies are considering moving their manufacturing back to the US, which would open up more industrial space and provide more jobs as well. You can expect to see new factories built in midwest states such as Kentucky and Indiana, and southeast states such as Texas and Florida. These states have a large number of skilled workers and governments who support those types of projects.
Changes to Retail
A lot of action in areas where people are moving to- texas, South dakota, florida. While many brick-and-mortar shops have faced hardships due to the increase in e-commerce, those that operate on a hybrid structure should find success this year. It is always important too to research the current consumer behavior trends to see how retailers will respond to their demands.
What do These Trends Mean for investors?
Keep in mind that commercial real estate markets are always changing and evolving. These trends are not certain, and it is difficult to evaluate their sustainability. Additionally, remember that market dynamics significantly differ not only across sectors but across US regions as well. These uncertainties, though, should not deter you from investing in CRE! As long as you do your research before making any moves and are able to adapt, you will be set up for success.
If you have any questions about these trends or are interested in investing in commercial real estate yourself, give us a call and one of our experienced brokers will be happy to help you through the process!