Industry Insights

Commercial real estate trends to look out for in 2021

June 16, 2021

The commercial real estate industry is changing. Because of the COVID-19 pandemic, the year 2020 was unlike any other. And it is likely to affect the commercial real estate industry throughout 2021 and beyond as well.

Let’s take a look at some trends brokers and CRE firms will want to keep in mind in 2021.

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Mixed-use properties are reducing risk

Vacant malls are being converted into other uses in the CRE industry. More specifically, 39% of the reported responses from the NAR 2021 Q1 survey were conversion of vacant malls into mixed–use properties. The next most prevalent reuses were distribution centers, churches, or self-storage facilities.

This is important because in 2021, reducing risk is crucial.

Owning mixed-use property provides diversification of income streams, helping the property to sustain performance during difficult economic times and reduce investment risk. In other words, when compared to single-use properties, mixed-use buildings can generate greater long-term performance—which is exactly what commercial investors are looking for right now.

Companies are eliminating or decreasing office space

It is pretty obvious that working from home will continue in 2021. And as a result, many companies are eliminating or decreasing office space in order to cut unnecessary costs.

In fact, 70% of NAR commercial members who responded to the 2021 Q1 commercial survey reported that companies are leasing or moving into offices with small square footage due to working from home. And although some workers are eager to get back to the office, many will demand that flexibility beyond 2021. 

This means brokers need to be prepared to offer shorter leases as opposed to longer, but this also opens up opportunities for non-typical places to have commercial spaces—like suburban areas.

Ecommerce is booming

Although Ecommerce was already growing prior to the pandemic, the pandemic made it a necessity. It forced consumers to change their shopping habits, and we have seen a huge increase in online options for purchasing groceries, electronics, clothing, and more.

As a result, retail shops and third-party logistics businesses are growing and will need to lease warehouses for their fulfillment needs.

This increased need for warehouses and industrial spaces will provide a steady increase in leasing opportunities in the commercial real estate market that brokers and CRE firms should take advantage of.

The need for affordable housing is increasing

The economic distress caused by the pandemic has brought attention back to the need for affordable housing. And because multifamily housing has the lowest barriers to entry, it is expected that it will continue to grow.

Due to low inventory, demand will continue to go up and vacancy rates for affordable multifamily housing will remain relatively low in 2021. And additionally, because of larger spaces and lower rent costs in suburban areas, there will likely be a shift from urban or city living to an increased occupancy in the suburbs.

This increased need and opportunity for multi-family housing—specifically in suburban areas—should be top of mind for brokers and CRE firms in 2021.

Interest rates will stay low

In an unprecedented effort to provide stimulus to the United States economy, the Federal Reserve has cut interest rates to all-time lows. And that is likely to remain the case throughout 2021.

In fact, the Federal Reserve expects to maintain these historically low interest rates through 2022 and possibly even into 2023.

And these low interest rates are not only going to be good for economic recovery, but they also provide a great opportunity for commercial real estate borrowers and investors now and in upcoming years.

CRE tech is reshaping the industry

The biggest trend in the commercial real estate industry over the past few years has been the extraordinary growth of real estate tech startups. And the current state of the working world makes that tech even more important.

It is clear that we’re on the cusp of CRE technology transformation and retail, office and multifamily are all going to be revolutionized as a result, as are brokerages themselves.

Are you keeping up with the latest CRE tech trends?

With Buildout’s full suite of connected tools, you can revolutionize your brokerage by streamlining your processes and improving efficiencies—ultimately helping you grow your brokerage and close more deals.

If you haven’t seen what Buildout can do for you and your team, get in touch with us and ask for a personalized demo today.

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