NAR July 2021 Commercial Market Insights

Sustained Job Creation

Sustained job creation, more consumer spending, and the continuing return of the workforce to the office underpinned the commercial real estate’s recovery across all property sectors in the first half of 2021.


Acquisitions of investors of commercial real estate rose acquisitions rose 34% in the first half of 2021. Commercial prices continued to recover, with property valuation just 1% below the valuations prior to the pandemic at a broad level. With prices firming up, cap rates continued to compress across all property types, with the lowest cap rates for apartment and industrial property acquisitions.

Apartment and Industrial Properties

The apartment and industrial properties remain the most favored assets among the core property types. Apartment absorption rose at the strongest pace in a decade, with the median rent for vacant apartments rising at 18%. In the industrial property sector, the vacancy rate fell to 4.5% with consumers sustaining their ecommerce spending. The retail property market also rebounded, with acquisitions directed towards shopping centers (multi-tenants) than shops (single-tenant), Hotel acquisitions, while accounting for a smaller portion of the investment deals, were 200% above the level one year ago. One use for vacant hotels/motels is for multifamily housing. The office market remains the weakest property sector, suffering sustained occupancy losses in the second half, with a total negative net absorption of 170 million square feet since the pandemic and a vacancy rate of nearly 18%.


Barring a major resurgence of coronavirus cases arising from the delta variant that could lead to another economic shutdown, NAR Research anticipates that sales and commercial leasing will continue to expand in 2021 and more strongly in 2022. However, given the large loss in office occupancy and the office construction in the pipeline, the office vacancy rate will likely continue to remain elevated at the current level throughout 2022.