The outlook for 2021 commercial real estate largely depends on a variety of factors such as industry and geography. On a global scale, the projected 2021 commercial real estate sector has slowed dramatically. Businesses and their rent flow are critical to investors and property managers. Many industries such as retail and hospitality have been hit hard by decreased spending and travel in 2020.
In 2020, many commercial real estate investment trusts went bankrupt. However, there were some industry sectors that fared well such as pharmacies, healthcare facilities, and grocers. Warehousing, manufacturers, life sciences, and data centers have also profited given the increasing demand for healthcare data, products and related supplies such as masks, sanitization tools, and gloves.
A glimpse of the near future
In 2021, commercial real estate industry experts are watching for influxes of increased investment. Warehouses that handle last-mile logistics and PPE materials will continue to quickly adapt to meet community needs. For real estate investors, this will continue to be a growing area of interest.
While vaccines are on the way, social distancing will likely still be in place. The second half of 2021 is expected to see an increase in travel, people returning to offices, and leisure activities. The retail and hospitality sectors are also projected to improve with business activities and cash flow seeing some sense of normalcy again. When commercial tenants are in a better position financially, job growth is expected to resume.
The United States is extremely divided on its COVID-19 response and the restrictions in place from state-to-state. These differences will, in turn, have an effect on commercial real estate in 2021.
Gay Cororaton, senior economist at the National Association of Realtors (NAR) predicts that secondary metro cities such as Phoenix, Dallas, Colorado Springs, and Salt Lake City will continue to do better than primary cities such as New York, Boston, and San Francisco.
Due to the high commercial real estate expenses in these geographical locations, primary cities will have more difficulty recovering. This is due to the increase in permanent remote workers, and more people moving out of these areas because of higher living expenses.
The long-term impact is still unknown. When employees are able to safely return to the office, long-term effects of remote working levels will become clearer.
From a local perspective, the 2021 commercial real estate sector is expected to be resilient in Phoenix. In a previous blog we talked about the success of the Phoenix housing market in 2020, which is expected to continue into 2021.
More people continue to move from primary cities with high cost of living and increasing commercial tenant pricing. Places like Phoenix have more space and lower cost of living, which has continually shown to be important for growth in the Valley within commercial real estate.
It is important to note that the availability of treatments in 2021 and continued restrictions with COVID-19 can change the course and timeliness of economic recovery in the commercial real estate sector.
The team at Landmark Title will continue to monitor trends, as we continue to grow our operations. Our offices remain open with 50-65% of our team working remotely. In 2020 we added an office in Las Vegas and we opened two others in Maricopa County. We will continue to hire escrow and title officers for both our residential and commercial teams.
If you have a residential or commercial real estate transaction and need an expert in escrow or title services, we are available to answer your questions.