During 2020 and the onset of 2021, the demand for residential real estate soared creating an impressive sellers’ market. However, commercial real estate seemed to stagnate. As the year reaches its halfway mark, predictions for commercial real estate have started to experience an upswing.
CRE Attracts Investment from Many Sectors
Businesses depend on a variety of things to thrive. Retail and hospitality are reliant on travel and hospitality to flourish. Many real estate investment trusts (REITs) have experienced bankruptcy, but others have fared better, especially those that depend on big-box retailers. Other segments are also doing well such as data centers and warehousing.
Increased investment will climb in the second portion of 2021. Warehousing demand is projected to grow due to the continuing demand for e-commerce.
Office space is going to undergo a resurgence as the year progresses. It is believed that office workers will again start returning to in-person work and forego remote officing. Investment demand for office space will start to grow.
Foreign Investor Interests
Renewed office interest is going to entice foreign investors, especially considering that the dollar has experienced a period of weakness. The investors will be looking for short-term deals. The weak market is creating a demand to score on commercial deals which will mature over time. It is believed that 2021 and 2022 will create the greatest demand.
The interest in commercial real estate for investment potential will not occur nationwide but be focused in certain hubs such as Boston where heavy concentrations of certain types of work, such as life sciences, flourish. Other areas of forecast interest and growth include Washington D.C., San Francisco, San Jose, Seattle, and Denver.
The hotel industry has suffered a massive hit due to the COVID19 pandemic. People are not traveling to large, urban destinations for vacations as they once did. Many hotels are struggling to make their mortgage and facing possible bankruptcy. However, it is projected that hotels in distant, more rural areas will thrive as people try to get away from large populations and socially distance.
With eCommerce more popular than ever before, warehouses continue to be a successful commercial real estate investment. Logistic companies scramble to meet the demands of e-commerce orders. Many predict that there will be a demand of 250 million square feet in 2021 and an additional 211 million square feet needed within five years.
Investors will have a hard time finding available warehouses but for those who already own warehouse real estate, they can either sell for a substantial profit or sit back to enjoy high rent prices. This is especially true for warehouses located in the U.S. south where population growth will also have an impact on prices.
If you are interested in selling, buying, or leasing commercial real estate in California please contact RE/MAX Top Producers Commercial brokerage for more information.