The commercial real estate industry suffered majorly due to the pandemic situation. If you look at 2021, the market has appeared to be a turning point. But also, there have been great changes in the economy and increasing demand for all of the activities in the asset classes. With industrial and multi-family properties leading the way in 2022, one can expect great things from the commercial real estate market. It is expected that the market will continue to flourish thanks to the robust demand and economic growth from both the investors and the tenants. The investment activity will surely increase with significant capital worldwide, driving commercial real estate as investors search for better properties and returns.
After all the setbacks and the issues the industry has faced, one can only expect that 2022 will bring positive results. So the guide has mentioned the top ten CRE finance trends of 2022.
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Top markets for CRE investment
It is expected that the year 2022 will bring in great opportunities for both suburban and urban markets, including the sunbelt metropolitan areas like the Miami, phoenix sector that will lead the way. The market rankings herein are based on critical metrics like employment growth, population, the cost of running a business, and investors’ interest. The markets that are now topping a list of all the investor’s portfolios are Austin, Nashville, Phoenix, Atlanta, Dallas, Durham, Boston, Tampa, Seattle, and Charlotte.
Top Trends for CRE
There have been studies that have revealed accepting forces in the commercial real estate industry. There are certain things that the industry’s top investors are watching for in 2022 and beyond. This includes.
- Buying and selling in fractional manners of the tokenized estate. This will help make investing more accessible and a lower entry barrier for those new investors in the industry.
- It is expected that a commercial secondary market will see commercial districts revitalize, which means the investors who are well established in the industry will be able to capitalize on redevelopment opportunities
- The developers of the industry are now turning into professional third party representatives who have got just the right resources for handling the real estate projects and the construction
- Adaptive reuse and mixed-use zoning of places like hostels will be a great source of value-added investment for many more years to come
- Commercial real estate properties are turning to be customer-centric businesses. But the tenants expect more technologies like online platforms for having a better user experience.
1. Multi-family
It is expected that the occupancy in the multi-family sector will continue to rise, with about 1.5 million apartments being absorbed between Q2 2020 and Q4 2021. The strong demand for such housing has ensured that the multi-family vacancy rates are down to an average of 4.6 % in the US. Crick has seen the multi-family properties were the fastest-selling with an average closing time of about 123 days in the market and Q3 2021. So the market will continue to see great demand in the coming year.
Evolving flex space design
As more and more people continue to work from home, there is an excellent requirement for flex space and larger living areas. The apartment communities thus will see less emphasis on the common indoor areas and more on the outdoor living and recreation options.
Interest in senior housing will grow.
There are a variety of options for seniors. It is expected that the market will continue to reward the middle market and result in one of those highest return options. Like the hotel industry, it provides various services in senior housing. Thus the residents can choose the services they want.
2. Office
There has been a lot of doubt about the use of the office space in the coming time, but in reality, the service remains positive and modest as the businesses are returning to the office, and the schedules are being on time. Besides, the secondary office markets like Austin are among those metro areas with the highest positive net absorption rate for the office spaces.
Work from home is creating existential change.
Although it is pretty challenging to anticipate the impact of work from home on the hybrid work models, the office market remains strong. The office buildings that are located in the right location and have the amenities will thrive. While the low-quality properties might eventually have to upgrade or stay unoccupied.
Sustainable demand for medical office space
The aging population and the covid-19 factors will now bring demand for health services and medical office space. As a result, telehealth use will undoubtedly increase in the coming time. But the virtual services will complement the medical office space rather than a substitute for in visit medical assistance.
3. Retail
Undoubtedly the pandemic has led to an upward trend in consumers spending money on purchasing through online platforms. No doubt, it has been quite a positive change for The E-Commerce industry.
Ecommerce keeps on changing.
The E-Commerce industry will continue to force retailers to make physical changes to keep up with pick up and the home delivery demand. Besides this, the retailers will also have to rationalize by operating smaller stores and more new sales channels for online ordering. Consumer shopping has greatly shifted from high-end retailers to local centers use during the pandemic, leading to great returns.
Store closings
There have been a significant number of government programs supporting the consumers throughout the pandemic leading to better gains for the retail sector. However, some of the small changes are still behind their end. This means if the store closings continue to occur, then the landlords might get the opportunity to exchange then non-paying retailers with those who can pay the rent online.
4. Distribution industrial and logistics
The experts expect great demand and performance for the industrial sector in the coming year. It is estimated that about 475 million square feet of industrial space have already been used over the years. The amount is expected to grow significantly.
Logistic demand will outperform
The E-Commerce penetration and consumer preferences for online shopping have led to the demand for logistics spaces. However, the supply chain bottlenecks are forcing the logistic user to shift from just in time to focusing more on the supply chain resilience.
Agree to pay higher rent for better space
No doubt the industrial buildings are located at prime locations and come with modern features that will continue to get premium rent. The users will continue to look for those properties that can deploy proper automation to control the costs better and guarantee faster delivery times.
Self-storage will reach heights.
Non-traditional properties like self-storage have performed excellently during the pandemic situation. It is expected that there will be a great demand. In the coming time, the homeownership demographic is estimated for self-storage. As the millennials are starting families and the recent college graduates are getting jobs in the cities where living space is quite premium paying interest, the high-quality self-storage unit is now crossing cap rates below 4% in some markets. This is a trend that most investors are hoping will grow in 2022. While the institutional investors also have an ongoing interest in the storage properties in markets like New York. In contrast, the small investor groups will continue to focus on secondary marketplaces to make the most of the available opportunities and make money from something non-traditional in the industry.
The commercial real estate industry is expected to grow significantly in the coming year. Some trends will rise and guarantee that the industry once again gets back to normal. But things will take time. After all, no one can expect to get results in one day. Besides this, understanding the industry is extremely important to make the most of the existing situations. This is why having professional support is extremely important.
Conclusion
As the world is recovering from the pandemic, new challenges and opportunities emerge for commercial real estate owners, investors, and operators. The business and demographic trends will keep accelerating with the industries and the multi-family seeing significant demand in 2022 and beyond. It is expected that the estate stakeholders will find investment opportunities among all the asset classes. But having support is extremely important. This is where professional help will make a significant difference. Private Capital Investors is the one you can rely on for help. They have got the right experts who can help you better understand the available opportunities in the industry. By staying by your side and helping you, the experts will guarantee you a better chance of earning an investment worth it. Contact them today to schedule an appointment and take the help you need to thrive in the industry.
