Investor Demand for U.S. Commercial Properties in Late 2021 Surpasses 2019 Levels
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Global real estate consultant CBRE reports this week that inquiries from commercial real estate investors (confidentiality agreements signed by prospective buyers) through the first week of December 2021 exceeded the total for full year 2019, with inquiries from July 1 to December 8 increasing 40% year-on-year and increased by 14% compared to the same period in 2019.
Investor activity is increasing in the most challenged sectors
Despite heightened uncertainty due to rising COVID-19 infections and a reduction in the Federal Reserve’s bond purchase program, strong investor interest continued.
Retail inquiries have increased by more than 87% since 2020 and are slightly above the level of 2019. The hotel and office sectors also recorded growth from 2020, but fell by 5% and 20% respectively compared to pre-pandemic levels in 2019. Multi-family and industrial inquiries continued their momentum from last year with increases of 31% and 48% respectively compared to the same period in 2020. The increase in investor inquiries is accompanied by an increase in the investment transaction volume, which also exceeded the level of 2019.
Days slimming in the market
On the plus side, the average number of days in the property sale listing market has decreased, says CBRE. In the hotel, industrial, multi-family and office sectors, real estate offers were withdrawn from the market faster than in the same period of the previous year. For retail offerings, the average number of days on the market increased 3%.
While improving compared to 2020, entries in most sectors stayed in the market longer than the comparable period before the 2019 pandemic, with retail listing lifetimes increasing 22%, followed by hotel listings by 11% and offices by 9 %. The days on the market were almost the same for apartment buildings compared to pre-pandemic levels, while industrial assets declined 10%, according to CBRE.
Positive outlook despite uncertainty
CBRE expects investment activity to continue strong in 2022. The total investment volume is expected to increase by 5 to 10% compared to 2021. There are potential headwinds, such as a more restrictive Fed and an increase in COVID cases in the first quarter due to the Omicron variant. Nevertheless, economic growth of 4.6% is expected for 2022. Strong economic growth will drive sustained improvement in real estate market fundamentals and increase investor confidence.
