What to Expect in the Commercial Real Estate Market in 2022
Jean Francois Desormeaux believes that, despite the current crisis, commercial real estate is expected to rise. The supply/demand balance will favor occupiers, and fresh money will flow into real estate debt. In 2022, a rise in retail property prices will be one of many important themes driving the business. Here are some critical signs to keep an eye on:
New generational trends: Between 2016 and 2022, the burgeoning Cohort Y generation is predicted to continue to enhance real estate, with most enterprises forecasting revenue growth. In the next years, the advent of Generation Z millennials will drive job growth, and greater earnings will help real estate’s bottom line. Demand will be boosted by the appearance of new households, yet halted population growth may provide problems in the future.
The Zika virus has had an effect on commercial real estate markets in the United States. While it had a negative effect on retail and leasing activities, it increased investor confidence and transactions. While the Zika virus reduced commercial real estate sales by 28% in the first quarter of 2021, it did boost investor confidence and transaction volumes. Commercial real estate sales grew by 17% in the second quarter of 2021. According to a recent analysis by Mercer, a lack of public confidence and anxiety over Zika might stimulate fresh investment in the industry.
Jean Francois Desormeaux pointed out that, while the multifamily industry is optimistic for the next three years, it is reliant on a few factors. Multifamily demand will continue to rise as the economy improves and housing availability tightens. Furthermore, more millennials are choosing to raise their children outside of conventional metropolitan hubs. This will raise the need for industrial premises, which will need to house more items. In the meanwhile, an increasing population will boost single-family rentals in the suburbs.
In the second half of 2021, the commercial real estate market started to improve, and it continued into the first quarter of 2022. Vacancy rates fell in all important commercial sectors, including office space, in the fourth quarter of 2021, but rents remained unchanged. Despite the slump, investors are purchasing hotels with the intention of converting them to other asset classes. This is a fantastic chance to make a lot of money in the sector. Investors must, however, be wary of markets that have been overbuilt.
The demand for multifamily commercial real estate will likely continue to climb. Many young tenants were displaced to the suburbs by the recent epidemic, but they are now free to live independently. In addition, the availability of better-paying occupations has allowed these young people to live independently. However, in many places, a scarcity of affordable housing is dampening the market. Self-storage will almost certainly be a winner for investors, and the number of millennials traveling to areas with severe housing constraints will only rise.
The retail industry is set to face significant changes as customer buying patterns shift. Malls have been compelled to minimize foot traffic and adapt their spaces for new purposes as a result of the rise of e-commerce. As e-commerce grows in popularity, companies must guarantee that pick-up transactions can be accommodated. Into e-commerce grows in popularity, malls are being repurposed as office and retail locations. Furthermore, many properties are now being repurposed by investors.
Secondary markets will continue to be revitalized, presenting possibilities for well-positioned investors. Adaptive reuse and mixed-use zoning are two significant themes that will continue to stimulate value-added investments in the coming years. Additionally, the commercial real estate market will become more customer-focused. For attracting renters and improving user experience, online platforms will be more important than ever. As a result, keeping up with current trends and making prudent investments are critical.
According to Jean Francois Desormeaux, hodes Weill’s 2021 Institutional Real Estate Allocations Monitor, 49 percent of investors consider sustainability and ESG factors, while 82 percent want a balanced environmental strategy. Furthermore, according to a recent JLL research, renters pay special attention to property owners’ ESG efforts. They pay attention to things like safe working surroundings, clean air, and other things. According to a survey conducted by Cushman & Wakefield, LEED-certified buildings sell for 25% more than non-certified ones.
