Commercial Real Estate Market Report – July 2020

The commercial real estate market is recovering but remains weak compared to conditions before the COVID-19 pandemic, according to NAR commercial members who responded to the 2021 Q1 Commercial Real Estate Quarterly Market Survey and industry data.

Acquisitions for large commercial real estate―properties or portfolios of at least $2.5 million ― fell 28% year-over-year in the first quarter of 2021, with transactions declining across all property types, except for hotel acquisitions. Investors could be acquiring hotels to convert into other uses such as multifamily housing.

Among commercial members of NAR who participated in the quarterly market survey and whose acquisitions were typically properties or portfolios of less than $2.5 million, transactions declined by an average of 1%. Respondents reported an increase in sales of land and industrial properties and a decline in sales of other types of commercial real estate.

Commercial real estate prices continue to firm up, but the value of commercial real estate is still broadly down by 6% compared to one year ago.

A majority of NAR commercial members who responded to the 2021 Q1 commercial survey―70% ― reported that companies are leasing or moving into office with small square footage due to working from home.

The commercial real estate market’s recovery will remain uneven in 2021. Commercial members of NAR who responded to the survey anticipate a modest increase in sales of land (5%), industrial warehouses (3%), and Class B/C apartments (1%), but anticipate a decline in sales transactions of retail, office, and hotel/hospitality properties in the next 12 months.

However, commercial real estate transactions should experience a stronger recovery across all sectors in 2022 as more businesses operate at normal capacity, a larger fraction of the workforce returns to the office, and as business and leisure travel picks up strongly in 2022 with the broad swath of the population fully vaccinated, and assuming there is no resurgence of deadlier COVID-19 variants. Enjoy reading the latest report!