After two years of a seller’s residential market, buyers are accustomed to the effects of various COVID variants, inflation, and stock market fluctuation on the real estate industry. Low inventory, competitive offers, and inflated listing prices have become the new normal for buying a home.
While you may think the same is true for commercial real estate, trends indicate that now is the ideal time to invest in commercial properties. Whether it’s a business looking for a new place to call “home,” or a professional investment in a multifamily property, commercial opportunities like these will become more common in 2022.
No one wants to jump in without doing extensive research first when it comes to investing. To help you do your due diligence, we’ve outlined six trends below that indicate that now is the time to invest in commercial real estate.
Rental growth will drive market expansion
With the housing market still being a seller’s market, more prospective buyers are deciding to rent a little while longer, which is an opportunity if you are in the market for a multi-family investment. DealPath reports that the rental market will grow because of the growing economy, increased employment, rising wages, and healthy savings. When it comes to businesses and renting, property companies are struggling to commit to a long-term lease, given the uncertainty in the world. A commercial property with a shorter lease could be favorable to many business tenants.
Commercial capital points to continued growth
Forbes notes that Preqin reported that commercial real estate funds collected over $152.2 billion through fundraising through mid-October, which is just waiting to be deployed. That indicates that there will be substantial growth in commercial projects across various industries over the next year because there are funds to support the growth.
Smaller markets will outpace major markets
As a result of the pandemic, many residents fled major cities and ended up in smaller markets. With this migration, more businesses will want to set up offices outside of the major cities they once resided in. Their office rent would be cheaper in a secondary market like Phoenix or Charlotte, but it’s also where their employees are.
Office demand is increasing
Two years ago, businesses shut their doors, and now many businesses are offering a hybrid workspace. With even a gradual return to the office, businesses will need a physical workplace for their employees to return to. JLL reports that commercial leasing rose by 28.7% in Q2 of 2021. With Google’s recent announcement, reported by the Wall Street Journal, that they are looking to purchase a New York City office building for $2.1 billion, we anticipate other companies will follow suit.
Proptechs are growing in popularity
The Deloitte Center for Financial Services reported that their survey of commercial real estate executives indicated that 3/4 of respondents work for companies planning to expand partnerships with, or invest in, proptech this year. In 2021, real estate and proptech raised about $21 billion in 2021, according to Crunchbase. This growth highlights that more deals will be made as businesses look to utilize various property technology with their commercial investments.
New markets are expanding
While e-commerce outperforms physical retail locations, these physical locations won’t disappear. Instead, retail shops will be reimagined as distribution centers, pick-up locations, or showrooms. At the same time, the life sciences industry has received increased attention during the pandemic. These businesses have a universal goal of researching and developing medicines and treatments that can help us live long and healthy lives. These businesses have gained more and more funding and as a result, will need more and more office space. Another area expected to boom is operational real estate like storage, senior living facilities, and student housing. If you keep your eye on expanding markets, you’ll find an opportunity for commercial investment.
If you’re ready to take the plunge with a commercial real estate investment, Coldwell Banker Commercial Elite can help. Our experienced agents know the market inside and out and can help you find a property that meets your investment goals.
To get started on your search, reach out to a member of our team today!