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March 10, 2021

National Commercial Real Estate Insights

Many have noticed that the residential housing market has been consistently upward for almost a year now. It’s easy for people to think only about homes when we talk about real estate. We drive in our neighborhoods, and we see “For Sale” signs. Real estate is where we live, right?

Yes, but there’s another crucial component to real estate that helps provide a full picture of the market. Commercial real estate is just as integral to the community as residential real estate. Even in an era of online business, brick-and-mortar establishments provide crucial needs every day.

As we all remember, a year ago, COVID forced us all to stay inside to “flatten the curve.” To keep people safe, many businesses were closed temporarily, and unfortunately, many temporary closures turned into permanent ones. Obviously, this led to an uncertain time for the commercial real estate market for much of the year.

According to the National Association of Realtors®’ s Commercial Market Insights for February, after-sales surged in December due in part to the rush to close deals by the end of the year for tax reasons. Commercial acquisitions fell again in January 2021 with sales volume down 58% from one year ago. Acquisitions fell across all property classes: retail (-73%), hotel (-73%), office (-69%), and industrial (-57%).

But there are signs that commercial real estate is starting to turn around. From February 2020 through January 2021, the report shows that the economy has generated 12.5 million jobs or 56% of the 22 million jobs lost during March and April. There are 9.9 million nonfarm payroll jobs still to be recovered. About 40% of the job losses are in leisure and hospitality, followed by the government sector (local). Many schools are still not open, health care and social assistance, and professional and businesses services. Only the finance and insurance industry had no net job loss.

It’s also good news that consumer spending on retail goods is up 4%, boosted by electronic sales, making up 16% of retail sales from 13% one year ago. New orders for durable goods as of December 2020 were 2% higher from one year ago, indicating that the economic recovery is in the works.

This news is hopeful for businesses, but there are some lingering questions. COVID has shown many employers that they can be flexible with working arrangements for their employees, possibly limiting the demand for retail or office property. In fact, 23% of the workforce force is teleworking, or 34.4 million, which is four times the level prior to the pandemic.

The bottom line is that if you’re looking to get into the commercial real estate market, consult a Realtor®. We have advanced market tools and analytics that can answer your questions on purchasing, leasing, and managing business and retail spaces. That’s Who We R.®