The year 2021 was a rollercoaster ride for the real estate industry with inevitable downfalls and limited achievements on forecasted statistics in specific commercial real estate segments.
Amid the unexpected catastrophic effect of the pandemic on the real estate industry, this year, there will be an increasing demand for digital real estate services consigned to property acquisition, evaluation, and financial management requirements.
Increased consumer spending and investments spiked the global economic growth to 5.5% in 2021, surpassing the pre-pandemic levels. Based on the current situation, the global output is expected to reach only 4% in 2022 and 3.5% in 2023.
Driven by the changing real estate trends and innovative digital transformation, commercial real estate is likely to hold a static position in 2022 with few changes in the market based on growing capital value, robust demand for investment activities among investors, and tenant needs.
According to Deloitte Insights 2022 commercial real estate outlook, only one-quarter of commercial real estate firms increased their technology investments to strengthen their service portfolio and asset management capabilities.
This outlook shows that about 75% of real estate firms are yet to expand their business digitally and are in utter need of technology-driven real estate services to achieve equitable success both offline and online.
Why do you need to stay updated on real estate trends?
The commercial real estate industry encountered significant volatility at the onset of the pandemic in 2020. Most traditionally accomplished real estate firms had lost their business without nearing their average financial targets. Only the firms that turned towards innovative digital practices made it through the rough times of economic and financial crisis that prevailed globally.
Whether you may be a realtor or investor, it is crucial to keep yourself updated on the ongoing and upcoming commercial property trends to make informed decisions on the property investments, interest rate, and mortgages and understand the future prediction of the market.
Before looking at this year’s real estate trends, let’s understand the current market.
- There is an unprecedented decrease in interest rates for purchasing real estate that has captured the attention of several property buyers in the last year.
- As the pandemic urged customers to purchase online, the owners of commercial retail properties expanded their space for in-house production facilities or as stockrooms to save the transportation and shipping costs.
- While several industry sectors dealt with losses, E-commerce sprouted well in 2021, and the purchase of properties for stockroom space went up.
- The hybrid work model proposed in 2021 retrieved the demand of office buildings for collaborative rooms and hybrid workspaces.
To better understand the prevailing trends in the industry landscape, let’s look at the commercial real estate trends in 2022
Commercial real estate trends 2022
Demand for retail space to stay the same
The trend of consumers buying goods online will continue in the year 2022. On the other hand, consumers who buy from brick and mortar stores will see an uneven roll this year. Consumers are interested in online and offline purchases, but in-store purchase tends to stay low.
With the trend of online sales and purchases in the retail industry, the new USB report says about 9% of US retailers could close their retail stores by 2026. From the landlord’s perspective, only the branded essential stores and established grocery malls will remain functional in the future.
As the retail spaces get occupied, the prevailing low-interest rates will create an opportunity for investors and buyers to acquire the property for inventory storage, order fulfillment centers, logistics warehouse, etc.,
Office Buildings to get solid investments
According to JLL’s office market outlook, the gross leasing activity rose by 28.7% in the second quarter of 2021. Since the pandemic, the largest commercial office property transaction happened when Google announced their purchase of an NYC office building for $ 2.1 billion in 2021.
The continued extension of the hybrid work model hints that the rent growth for office space will remain slightly negative in 2022.
With employees expected to work from the office for roughly three days a week in 2022, the office buildings tend to remain a hub for business activities as the employees’ visit on and off a few times a month.
This trend might remain the same, with a decrease of 5% to 15% in office space utilization in 2024.
Multi-family housing stayed among the top three CRE in 2021
The year 2021 was significant for selling a house but not for the people who planned on buying. With the onset of the pandemic, the demand for larger living space with the people staying indoors and working from home spiked the house rents.
The affordability to acquire houses for decent rents remained a challenge. Low mortgage rates and limited supply for construction pushed the value of ready-to-live homes high.
According to Redfin data, only 50% of typical homes were sold in 15 days last year, and more than 60% of them went off the market in two weeks.
So how will the housing market be in 2022?
According to the experts, the housing market is in top form at this year’s opening and may remain normalized.
The housing sales might decline, but they will exceed the pre-pandemic models, and the mortgage rate will increase to 3.7% in 2022 due to higher inflation.
The industrial real estate market holds the top position
Over the past decades, the industrial real estate market has stabilized its performance among other commercial real estate investments. The industrial real estate investments trusts have outperformed other commercial REITs by sector over the last five decades.
According to the National Council of Real Estate Investment Fiduciaries(NCREIF), the industrial real estate market had showcased an annual total return of 32.8% by 2021. The recorded value was double when compared to the following leading CRE sector.
Supply and demand are the driving factors for the industrial real estate market. Industrial real estate investors are seeing a spike in ecommerce, leaving a trail for more remarkable growth in coming years.
In 2022, the demand indicates the potential upper hand in the market and will expect to prevail beyond 2022.
Due to the voracious demand the industry has been facing, there’s an increase in the rent by 7.1% quarter over quarter as tenants compete for space.
Warehouse, logistics, and fulfillment centers are seeing the demands, and other drivers may arise to accelerate the need for all industrial properties in 2022 and beyond.
Scope for technologies in CRE 2022
It is evident from the current commercial real estate trends that technology trends will play a significant role in contributing to the industry’s success now and in the future.
Technologies can simplify the painful analysis processes and provide more accurate and quick insight into the prevailing market trends.
Here are a few details on trending technologies for realtors and investors to enhance their business operation efficiency.
- Innovative technologies and automated platform/software implementation remain the top priority for real estate organizations across industry verticals.
- Data acts as the backbone for all commercial real estate businesses. The new tools available in the market have accentuated the importance of data and its security. Cyber security takes the heart of the place as data security comes into consideration.
- Streamlined access to standardized data provided by advanced technologies makes it possible for investors to gain competitor insights and make informed decisions while investing.
Final thoughts
As the global market and nations continue to recover from the severe economic and financial crisis, 2022 holds new opportunities and challenges for every commercial real estate agent, broker, and investor.
Investing in any commercial real estate market can bring profits only with a better understanding of the prevailing trends in the market.
If you are a realtor or an investor who wants to strategize your business based on the latest trends, we are here to assist you with our comprehensive real estate services.
