Commercial real estate activity remained elevated entering 2022 with broad-based investment and transaction activity continuing from 2021. Multifamily and industrial assets are still seeing the most investment; however, retail activity has increased as confidence in the sector improves and concerns related to the COVID-19 pandemic wane. So far rising interest rates and persistent inflation have not seemed to dampen real estate activity, but the rest of 2022 could prove challenging if current economic trends persist or worsen. The dominating story of 2021 was the lingering effects of the pandemic and widespread supply chain disruptions and inflation. Issues that have not only stuck around but were joined by the political and economic uncertainty around the war in Ukraine.
- Geopolitical tensions, rising costs and lingering threats of new COVID-19 variants are all factors that could lead to a general economic slowdown over the rest of 2022.
- The shortage of available homes is pushing more investors to pursue build-to-rent models.
- A national office vacancy rate around 18% has left investors wary, although Moody’s Analytics stated the pandemic vacancy peak of around 18.5% may have already occurred in the second quarter of 2021.
- Retail sales were very strong in the first two months of 2022 with year-over-year sales up 14.14% in January and 18.18% in February.
- 2021 was a stellar year for the industrial sector as it saw record gains and all-time-low vacancies, however, concerns over supply issues are pushing many companies to migrate operations back to the United States and build redundancies into their supply chains.
- Despite evidence of higher interest rates, commercial real estate cap rates continued to compress in most sectors with investors eager to unlock cash flow.
Continue reading the Q1 2022 report for further analysis, insight and outlook into the multifamily housing, office, retail, industrial and capital market industries.