In all its many forms, the year 2021 will be engaging in terms of commercial real estate as the CRE industry will soon start to recover from the coronavirus pandemic markedly. Real estate experts roll out their commercial real estate predictions for 2021, which will be useful for CRE investors looking to invest in new properties.
The commercial real estate predictions for 2021 are also something to closely watch for by the investors who have invested in 2020 and looked forward to knowing about the possible returns on their investments made last year.
The popular opinion is that the year 2021 will be a year where the industry will recover from the covid-19 pandemic. However, this recovery will vastly vary from segment to segment and on different geographies, and it entirely depends on the recovery from the pandemic itself.
While the coronavirus pandemic is not gone yet, here are a few commercial real estate predictions for 2021 by the leading experts. In the short term, one must note that the worsening pandemic might impinge on any type of commercial real estate recovery as we wait for COVID-19 vaccine.
Even if it became widely available and convincing enough to allow borrowers to invest in different properties with the same confidence that existed pre-pandemic. These insights also depend on how willing are other business houses to open working without any restrictions and the jobs to return to the way it used to be pre-pandemic.
While we are in an economy with substantial job losses and commercial real estate investing is at the lowest for most people, it is the best time to invest in specific properties.
Because as the economy improves, the investors who invest now might be in for great returns. Read on to make informed decisions about CRE investing in the year 2021.
Warehouses & Distribution Centers are Hotspot Investment.
The E-Commerce industry and the drop shipping sector saw a boom during the pandemic as most people worked from home and ordered-in whatever they needed. The E-commerce industry suggests a boom in the warehouse and distribution centers, and thus, this might be the best spot for investment in the year 2021.
Commercial office spaces might not be a great place to invest in. The commercial warehouses and distribution houses are likely to see a boom. Many new startups require warehousing and distributing facilities to store their products before delivering them to their customers.
Thus, if you are investing in warehouses and distribution centers – it might be a good option for you. Furthermore, warehouses and distribution centers are likely to become even more valuable in the year 2022, so that’s pretty much a safe investment option in 2021.
Fall and Rise of “Retail” Stores
During the covid-19 pandemic, the retail store sector of the commercial real estate saw a major downfall as most of the population did not visit retail stores, which led the retail store owners to default on their loans.
This trend is expected to continue in the first half of 2021, and experts predict that there will be 20% less retail real estate by the end of 2025. It must be noted that once the coronavirus vaccine is distributed in the United States – the shoppers are expected to finally leave their homes and return to experience physical shopping or brick-and-mortar stores.
Thus, in a nutshell, the retail store commercial real estate sector will see a downfall and a rise again towards the end of 2021. Therefore, if you are looking to invest in retail stores in the year 2021 – it might not be a very safe bet in the beginning.
However – if you are willing to hold it until the end of the year, you might see some good returns as we are all aware that covid-19 is not here to stay, and we are soon going to combat the same.
A rise in the Co-living spaces
If there is one thing that became a trendsetter in the year 2020, then it is the Rise in the Co-living spaces across America’s different states. The millennial population of America was soon to realize the increased benefits of investing and moving into the Co-living areas for various uses like low costs and a sense of belonging and community, especially when most people were forced to work from home.
Thus, if you are thinking about investing in something that will reap good returns in the year 2021 – then it has to be co-living spaces. The number of co-living space agencies has been increasing since the time the covid-19 pandemic hit the fan, and this trend is here to stay for at least a few years.
Co-living spaces have become the new multifamily property investment, and many people are showing an active interest in such properties. Many commercial real estate investors are also converting their retail office spaces, which were vacated due to tenants’ numerous reasons, into beautiful, cozy co-living rooms at cheap costs and are trying to capitalize on the same.
So, even if you have a property that is not bringing you any cash flows – you might consider taking out a mortgage and flipping the same stuff into a Co-living space for best returns. Additionally, if you are thinking of investing in a REIT that supports in many co-living spaces agencies, that could be a good option.
Businesses are expected to bounce back to the in-person model.
Although the number of office spaces that shut down in 2020 due to the covid-19 pandemic is too high, few investors think about investing in corporate business houses, one must note that we can not underestimate the power of teamwork and face-to-face business interactions which is going to force businesses to bounce back to the in-person model.
As soon as the covid-19 vaccine is made available, most of the offices will soon re-open again, and businesses will bounce back to how they used to be.
So, if you have already invested in a commercial real estate office space, it might not be very wise to draw back your equity in the property just yet. The second half of 2021 will be a time where people will start going into office spaces again, which is a good option to hold your office space investment until then.
The secondary metro areas are great places to invest in
If you are looking to invest in the residential market – then the secondary Metro areas are great places to invest in in the year 2021. According to the real estate experts, secondary or even tertiary Metro areas are likely to do much better than the top tier cities like New York, San Francisco, and Boston.
The primary reason behind this is the factor of affordability, where millennials are choosing to live in houses at a much more affordable price than the tag of living in a fast tier 1 cities like New York or Boston.
As per the job growth and the migration trends pre-pandemic, people choose to move out of expensive areas like New York. They want to go into many affordable places like Atlanta, Charlotte, Jacksonville, Dallas, Phoenix, Colorado Springs, and salt lake city.
Thus, if you are looking to invest in a tier 2 City, you can safely go ahead and make your investments into your 2021 as these tier cities are likely to see a great boom.