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Monday, January 24, 2022

The Forecast for Commercial Real Estate in 2022 is Cautiously Optimistic


CRE in 2022

Make TheAnalyst PRO® An Integral Part
of Analysis and Marketing in the Year Ahead

For decades, a broad range of factors -- the economy, the political spectrum, the employment outlook, social and cultural developments -- and others have had an impact on commercial real estate both nationally and on a market-by-market level.

But over the past two-plus years, the COVID-19 pandemic, which continues to affect lives and livelihoods domestically and worldwide, can be added to the list.

Challenges brought on by the pandemic have been felt across all property types and resulted in short-term, flexible, and other new lease structures, a dramatic shift to remote and hybrid working, a decline in values for some properties, and continued uncertainty given the resilience of the COVID-19 virus.

From a management perspective, landlords had to be proactive in contacting vendors about vaccine mandates issued by municipalities or state governments and communicating safety and operational protocols to tenants and visitors.

And, issues with supply chain disruptions, shortages of construction materials and consumer goods, and concerns over higher prices for gasoline and everyday staples have had a bearing on people, governments and businesses.

However, there’s reason for optimism as the year 2022 unfolds. Sources have projected a positive 12 months ahead for the national economy, and in turn, commercial real estate. Here are some findings.

The Forecast for CRE in 2022

First, let’s review a perspective on the overall state of the national CRE market. The U.S. Real Estate Market Outlook 2022 released in December by CBRE opens with this statement: “CBRE is maintaining a positive outlook for the economy and commercial real estate in 2022, despite uncertainty over potential impacts of the COVID omicron variant and other risks.”

That cautiously optimistic viewpoint is supported by insight and analysis on the capital markets (a record year on the investment front, rising values for industrial and multifamily assets, a concentration in office and retail in emerging markets) and across property types, where the bolstered economy and job expansion will yield more office lease transactions and diminished sublease space. Retail properties, hit hard at the onset of the pandemic, will continue to recover due to improved efficiency and increased sales-per-square-foot. The explosion of e-commerce and strong rent growth will keep industrial properties in demand, and solid fundamentals, strong investor interest, and the projection of net effective rents above pre-pandemic levels could result in a record year for apartments.

A less property type-focused analysis of the future for CRE can be found in a January 2 report from industry news source BisNow. Among the nine predictions cited and supported by industry leaders: 

•  Proposed initiatives from Washington, such as the Build Back Better legislation, could hamper commercial real estate through more taxes and the possible elimination of 1031 exchanges.

•  The growth in remote working arrangements will compel owners of office properties to invest in amenities to lure people back in person, while owners of multifamily properties will need to put money into better technology and updated tenant resources, including access-controlled smart rooms and artificial intelligence to enhance shared onsite workspaces.

For a non-real estate perspective on the outlook for this year, the U.S. Bureau of Labor Statistics report released January 7 for the month of December is positive from an employment standpoint. The unemployment rate declined to 3.9 percent, and there was job growth in sectors like business and professional services. 

Incorporate TheAnalyst® PRO to Navigate the Road Ahead

As noted in the above examples, commercial real estate professionals will need to analyze and manage a great deal of information to be successful in 2022. Incorporating an affordable, comprehensive, and uncomplicated suite of analytical and marketing resources is paramount to success.

For more than a decade, TheAnalyst® PRO has provided CRE professionals with a broad scope of analytical and marketing resources that can help navigate the road ahead in 2022. With TheAnalyst® PRO, subscribers have quick access to an online tool that allows preparation of property and analysis reports and offering memorandums, use of investment calculators, and the ability to create flyers, flip books and even websites.

In a recent video, founder Todd Kuhlmann, CCIM, shares thoughts on the growth of TheAnalyst® PRO and what’s in store for subscribers in the future.

Commercial real estate always has been based on analyzing data and assumptions. Without question, this year may prove to be somewhat volatile and with continued challenges. Make the commitment to TheAnalyst® PRO today to gain that extra advantage in your commercial real estate business.