Economic Experts Predict Bright Path for Commercial Real Estate in 2021
Washington, DC, May 7, 2021 (GLOBE NEWSWIRE) –
The US economy saw one of the fastest declines in history last year, followed by a rapid and relatively significant rebound in the second quarter of 2020. Speakers at today’s forum on business issues and trends in business, held at REALTORS® Legislative Meetings & Held in 2021, the Trade Expo discussed these historical changes in the country’s economy over the past 12 months and forecast favorable prospects for the commercial property market for the coming year.
Lawrence Yun, chief economist at the National Association of Realtors®, today predicted that significant capital will be pumped into the economy in the second quarter of 2021, with consumers eager to tap into savings and unspent economic funds worth a year.
“Economic expansion and job recovery will lead to an increase in the occupancy of all types of commercial property,” Yun said. “However, general consumer price inflation is projected to rise 3% through the end of 2021 and remain stubbornly high through next year, which will push interest rates to 3.5%.”
Hotels, restaurants, theaters, and other establishments in the entertainment and hospitality industries are expected to benefit from this pent-up demand as many cities have eased or eliminated restrictions caused by pandemics.
While housing construction helped prop up the economy last year, housing and rental markets stumbled in the middle of the pandemic. However, Yun expects they will regain a foothold as the general economy continues to recover, particularly in urban areas.
“The housing sector experienced sudden fluctuations in occupancy – declining abruptly in the first few months of the pandemic and then recovering strongly in recent months – but we expect vacancies to fall and rents to rise,” Yun said.
Office rents have also fallen over the past four quarters, and it is unclear whether a new office rental will take place even as more workers return to their offices. According to NAR, the number of office space is expected to increase by 16.5% in 2022, while the vacancy rate in retail is expected to be 11.5% according to NAR.
“The industrial sector has been the star throughout the pandemic,” Yun said. “There has been a great deal of demand for industrial space and remodeling some of the abandoned properties, such as older shopping malls, can help meet that demand.”
Overall, the pandemic is causing profound changes in the commercial real estate sector.
including changes to vacant hotels / motels. NAR recently published case studies of converting hotels / motels into apartment buildings, a report demonstrating the feasibility of such conversions. Often times, these adjustments require public funding such as the low-income housing tax credit, the historical tax credit, or the tax break.
Speaking at today’s forum, John D. Worth, Executive Vice President Research and Investor Outreach at Nareit, gave a positive outlook for the future of commercial real estate.
“Working from home is the number one issue for the future of commercial real estate exposed to COVID-19,” he said.
It is noteworthy that commercial valuations are recovering, but these improvements are uneven across different property types and, during the COVID-19 period, high returns are being achieved in REIT funds invested in digital properties such as cell towers, data centers and logistics facilities as single-family homes, self-storage and Wood. He explained that stock prices are being driven by strong demand for housing, the surge in e-commerce, and the rising price of lumber.
“We’re going through a phase in which companies will experiment with the use of office space, but after a period of experimentation I am optimistic about the outcome of the office space sector,” said Worth.
Both Yun and Worth agree that the vacancy rate will continue to be high compared to prepandemic as hybrid work models become the norm in America.
The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members who work in all areas of the residential and commercial real estate industries.
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Quintin Simmons National Association of Realtors® [email protected]