Commercial Real Estate Trends—2021
What’s Hot & What’s Not
Medical Office Looks for Reopening Rebound: Several months after the initial shock of the coronavirus pandemic to the economy, real estate analysts are now offering insights into where certain sectors may go in the near future. For the medical office market, the final few months show the market slightly softening, according to the U.S. office report. The report suggests the activity may struggle to keep up with the 2019 levels as tenant walk-throughs, leasing, and development decline slightly.
Locally, we are finding that projection is pretty much in agreement with this report. It looks to us the market will remain a little slow and decline slightly, but our office showing and asking rents are remaining at 2019 levels. However, there has been a rise in concession packages to entice new leases.
We are also seeing a surge in interest for well-priced office space as users downsize. There is also a trend of new entrepreneurs who need space as they create new opportunities opening new businesses. Funding is plentiful at this time aided by programs through the Small Business Association (SBA) and local lenders. I personally have seen a huge jump in people starting their own businesses as their prior employers are out of business. There are several people who are also looking at single office space who once occupied huge company office complexes but have been forced to work at home. Many of these people will opt for a single office as they don’t want to work from the confines of home, whether their company subsidizes that move, or they just figure it’s worth paying on their own.
Hotels forecasted to lose $75B in Revenue:
One of the first casualties, hotels are looking at $75 Billion in lost revenue in the next year. Although other segments of the economy are showing slow signs of life, such as retail and office, hotels are faced with difficult prospects as travel and leisure lag. Forecasters are predicting a 29% decline in room occupancy.
School Year Starts with Plenty of Vacant Student Housing:
The situation seemed to make sense – colleges reduced costs (and headaches) by allowing private developers to handle student housing, with funds raised through municipal funding (bonds). But Covid-19 has blown a massive hole in that plan, with a tenant pool left dry as many students are staying away from campuses.
We are seeing that phenomenon here in East Lansing and Ann Arbor with overbuilt student housing projects. It will be some time before occupancy catches up to prior years. Until then, that market looks to stay in decline. That said, this may be the perfect time to get a bargain that will pay off long term. The question is what the holding time is and how to pay for the costs of holding the asset.
Warehouse in Demand in Markets Large & Small: Industrial has stood out in terms of performance in the tumultuous months of uncertainty and economic upheave. The demand is driven by the increase in need for warehouse and distribution of goods and services from internet shoppers and free shipping offered by online companies.
We have also found this market to be in particularly high demand not only for the reasons mentioned above, but by the legalization and grow of the cannabis industry. Whether it’s the growth, production or distribution, the cannabis industry is very reliant on small to medium size spaces for all aspects of their business. This has put a terrific strain on the availability of space. And, because that industry is so well-funded, prices have greatly risen for spaces that geographically fit their market. We see no decline in this submarket.
This article was used in part from an article in Commercial Investment Real Estate Magazine. For the complete article, please contact Adam at firstname.lastname@example.org, or by cell at (517) 980-4573.