Commercial real estate is expected to rebound in 2021

Leading economists said on Wednesday that as vaccination rates increase nationwide, commercial real estate is likely to see growth in all areas, driven by suppressed demand and large consumer savings. These forecasts were presented as part of the “Real Estate Forecasting Summit: Business Update” webinar of the National Association of Realtorsยฎ.

NAR chief economist Lawrence Yun (Lawrence Yun) said that the U.S. economy will continue to improve in 2021, and this improvement is likely to drive the benefits of most commercial real estate markets.

Despite the decline in unemployment and GDP in 2020, Yun said that due to federal stimulus measures, including direct payments and unemployment compensation, personal income actually increased by 10.7% in the second quarter of 2020 and 4.3% in the fourth quarter. He explained that higher incomes combined with reduced activity caused by the pandemic led to an increase in the savings rate. Once the distribution of the COVID-19 vaccine becomes widespread and consumers are more free to pursue pre-pandemic activity levels, this accumulated savings may lead to a strong economic recovery. Yun said: โ€œOnce we gain immunity from the cattle, all these savings may be released.โ€ โ€œMaybe as early as the second half of this year.โ€

Yun pointed out that as tenants return to the market, multi-family households may also be the beneficiaries of increased spending later this year. He added that the shortage of affordable housing and the trend related to the pandemic is that more family members join the family, which may be a further stimulus. He said: “Jobs are being created, and people may get tired of being with their families.” “Some people rent out because the price increase keeps them out of the housing market.”

Yun predicts that GDP will increase by 4% in 2021 and employment opportunities will increase by 3 million.

Calvin Schnure, senior vice president of research and economic analysis at Nareit, said that the trajectory of the CRE recovery in 2021 will be different from the previous recovery after the economic downturn, and the recovery speed may be faster. He said: “The way we got here is important.” He pointed out that, unlike the Great Depression, the economy and CRE will decline in 2020 due to external shocks rather than internal weaknesses (such as overheated markets or excessive leverage). He said: “The fundamentals of China Resources Entrepreneurship are not bad in 2020.” “In most sectors, supply and demand are in a reasonable range.”

Schnure also pointed out that there are differences in the way that the phenomenon of working from home affects office and multi-family job vacancies and rent. Vacancy rates in so-called โ€œgateway citiesโ€ such as San Francisco, Washington, D.C., and Boston have increased, and rents for offices and multi-family households have fallen even more, while in some smaller areas, vacancy rates in these two sectors are actually falling. Rents have risen in the city. He pointed out that the changes in both types of cities may be short-lived. “Working from home does have an effect, but I’m not sure if it is permanent. There are some signs that it may be temporary.”

Brandon Hardin, a research economist at NAR, said that the retail sector is expected to improve as the vaccine will be available in the second half of 2021. He said that as of January 2021, retail and food service sales have resumed, exceeding $155.4 from April 2020. One billion U.S. dollars, a total of 568.2 billion U.S. dollars. Harding said: “The retail industry should attract and retain new customers.” He did point out that the rebound in the retail industry ultimately depends on the comfort level of consumers entering the store. He also pointed out that adaptive reuse in the retail industry will create opportunities.

Hardin said that e-commerce has shown strong growth throughout 2020, with total sales of US$791.7 billion, an increase of 32.4% over 2019. He predicts that e-commerce sales will continue to grow, although the pace may be slower than 2020.

Harding said industry has also become a bright spot in business, partly because of the need to support e-commerce. He said that warehousing and storage jobs in February 2021 increased by 72,400 jobs year-on-year, and the industry recorded positive rent growth in the fourth quarter of 2020 and will occupy 80% of the market in 2020. The industry is optimistic: “Strong demand will continue.”

Gay Cororaton, senior economist and director of housing and business research at NAR, pointed out that land, industry, and multi-family households are all bright spots, and its sales prices in the fourth quarter of 2020 increased year-on-year (4%, 2%, and 1%, respectively). ). In addition, she predicts that by the second quarter of 2022, office jobs may return to pre-pandemic levels. However, she pointed out that the trend of working from home may continue to affect office occupancy rates. She said: “Even if work resumes, I think we will continue to see an upward trend in the vacancy rate.”

Cororaton predicts that the occupancy rate of multi-family, industrial and retail industries will show a positive trend, and for the retail industry, she includes physical stores in this optimistic forecast. She said: “Experiential shopping will continue.” “Physical retail will not disappear. People will not just shop online.”