Commercial Real Estate Investing Trends to look for in 2022

February 28, 2022

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2022 is positioned to be a very big year for commercial real estate investors. The past couple of years have been a rollercoaster for many sectors but as we saw the last year 2021 rebounded in a big way with transaction volumes rising by 64% compared to 2020 and up 12% above 2019. If you look only at commercial and industrial properties this was up over 30% compared to 2019.

All signs point to continued growth through 2022. Pandemic recovery is steady across the United States with demand for retail space rapidly climbing and commercial real estate getting picked up almost instantly after “going live” in hot markets such as Austin.

Here we’ll look at a few trends to look for this year.

Industrial Properties will be top performers in 2022

Both warehouse space and apartments are poised to be among the best-performing assets in 2022. A huge boom in changing consumer trends is driving this demand which we go into more detail on here.

Demand for Warehousing and Industrial Properties

One of the most significant reasons for the demand for these properties is more U.S. consumers buying from homes online. Purchases online have spiked over the past few years which has put more pressure on retailers to create more infrastructure to accommodate the distribution and warehousing needs for this trend that has no signs of slowing down.

As an example, at one point in 2021 Amazon accounted for 9 of the 10 largest warehouse construction projects. But this isn’t just an Amazon “thing”. Online retailers across the board are having to make these types of moves as well, both large and small, from Walmart & Kohls to Independent online-only retailers.

This same trend can be seen in industrial warehousing where manufacturers and distributors are housing more and more inventory to accommodate the increase in demand for parts, units, and tools.

Over 475 million square feet of industrial property has been absorbed year-over-year which is more than triple the number pre-pandemic.

Retail Commercial Real Estate will see a comeback in 2022

Overall, the increase in consumer spending is projecting a positive effect on commercial retail space. Cities such as Houston, Dallas / Fort Worth, and Atlanta are a few that are leading the way in this growth.

Commercial Real Estate in the Retail space is considered mainly to expand with larger and newer brands. With the increase in online spending and consumer buying behavior such as buying online and picking up in-store (BOPIS), many large retailers are choosing to expand their existing footprint by building out infrastructure to support these new buying habits.

Essential brands will continue to remain stable. Brands such as Walgreens and grocery stores are poised to survive and thrive moving forward.

Those that took that hardest hit during the past few years are smaller brick-and-mortar retailers that have little online presence. But this is leading the way for newer entrepreneurs who are coming in and taking advantage of those retail businesses who aren’t innovating and vacating their locations.

From the perspective of the consumer, reports are showing that they want more of both “online shopping” and “in-person buying”. So the overall outlook is very good for the retail space.

Commercial Office Space Will See Mixed Results

While we would rather have only very good news about all sections of the commercial real estate space, we’ll have to be okay with a moderate outlook for some. Office space is that area where we’re likely to see ups and downs without huge gains or big losses.

Absorption of office space remains positive but modest, mostly from the ways different parts of the US are handling remote work vs working from the office. Some of the markets to note like Austin, Miami, and Salt Lake City are showing the highest positive absorption of office space. 

There will continue to be a sustained demand for Medical Office Space as you would suspect.

The effects of COVID, a hyper-awareness of health & sickness in general, and an aging population will drive demand for medical office space this year. Even with the growing usage of telehealth, you’ll find that many medical office spaces are combining digital services to complement in-office visits which creates a hybrid use for this sector of commercial real estate.

The prediction is that the office will remain the hub of business activity, but flexible work from home schedules will allow many employees the convenience of not having to commute a few days a week.

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Investing in the commercial real estate space is a great way to enjoy passive income while watching your investments grow. In an uncertain market like today, CRE investment can bring stability to your portfolio.