Commercial Real Estate

What’s Driving Growth in Commercial Real Estate

What’s Driving Growth in Commercial Real Estate

What’s Driving Growth in Commercial Real Estate

Six months into 2021, we are seeing a clearer picture of areas of growth in commercial real estate. Throughout 2020, the U.S. saw pauses in business operations, an increased adaptation to digital communication, increased Growth in Commercial Real Estatevacancies in commercial office space, and significantly constrained economic growth. As business returns to some level of normalcy, the commercial real estate market is projected to recover. Today, we see several positive trends in the commercial real estate sector. 

 

Predictors of future growth

Commercial real estate trends are considered a key indicator of economic health, and 2021 is proving to be a year full of potential. As of February 2021, private offices surpassed other properties, marking a construction start of $1.96 billion. An increased focus on employee health and safety concerns following the pandemic quickly led to the reimagination of office spaces. The future of workplace occupancy is still uncertain, as a percentage of employees are resistant to return to in-person work, and companies are still navigating their plans. While employers begin to call their employees back, we are seeing office renovations that include more private office space and room for social distancing. 

 

Warehouse space is another growth sector in the commercial real estate market with construction starts of $1.79 billion. Due to the surge in online shopping, warehouse space is in high demand, as companies scramble to meet their production output. Other industries that are now experiencing accelerated growth include: retail and shopping (1.41B), government offices (1.36B) and hotels and motels. 

 

The pandemic heavily impacted retail, restaurants and hospitality. As people are eager to socialize and travel, we are seeing a comeback of commercial properties in these areas with newly renovated indoor and outdoor spaces that comply with public safety. The lift on travel restrictions is stimulating plans for new hotels to prepare for pent-up demand.

 

Commercial real estate regional hotspots

As growth in commercial real estate and development moves ahead, many areas across the United States are experiencing high volumes of investment. The Southwest is a region of interest for many investors, but the leading hotspots for commercial investment and purchasing is in some of the popular urban areas along the southern region of the U.S. These cities include:

 

  • Austin, Texas
  • Tampa Bay, Florida
  • Atlanta, Georgia
  • Nashville, Tennessee
  • Raleigh-Durham, North Carolina

 

Additional regions expected to see significant commercial growth in 2021 include:

 

  • Salt Lake City, Utah
  • Portland, Oregon
  • Denver, Colorado

 

Looking forward

Despite the strain on the hospitality, restaurant and retail industries, commercial real estate is projected to remain robust. To such an extent, some sources claim the nation may produce the largest Gross Domestic Product (GDP) since post-WWII. 

 

Property price indexes demonstrate a very promising commercial and economic recovery, considering the all-property index (a combination of all commercial property types/sectors) is now only 1 percent below pre-pandemic levels. Some industries, such as industrial, manufactured home parks, and self-storage are reaching record highs with a property index of 15-25 percent greater than pre-Covid marks. 

 

The pandemic took a heavy toll on the overall health of individuals, industries and the economy; however, as we near the end of Covid restrictions, business and real estate opportunities are growing. If you are interested in investing or are involved in a commercial real estate transaction, Landmark Title has a team of experienced escrow and title professionals available to help you successfully close. Contact us with any questions or to learn more about our services.

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