Wednesday, 17 November 2021 09:52

2021 Commercial Real Estate Trends Likely to Continue Into 2022

We’re almost two years into the COVID-19 pandemic, and industries are still feeling the reeling effects. The commercial real estate (CRE) industry is no exception. The course has changed for many industries with a transformed landscape leading to 2021 commercial real estate trends that will carry on well into 2022.

As experts in the commercial real estate industry, Lavoro Consulting has kept a watchful eye on trends that affect our clients’ CRE plans, from engineering firms to property managers. As such, we've compiled a list of the most important trends we anticipate effecting commercial real estate beyond the next year.

6 Top 2022 Commercial Real Estate Trends & Predictions

1. Office Space and Remote Workers

The in-office workforce is shrinking and adapting to a new norm. The pandemic isn't over and companies are still making post-pandemic decisions about their employees' workspaces. With remote and flexible work still an upward trend, many businesses with office space find themselves contemplating a lease renewal for a space that is now too large for their transformed workforce.

That’s why many office tenants are planning on negotiating with their landlords for smaller units upon their lease renewals. With approximately 30% of Americans working remotely, many more companies are going to have to rethink the nature of their employee workspaces and downsize their physical business locations.

2. Vacancy

As mentioned above, office attendance has been declining for the past decade, paving the way for remote work. However, the COVID-19 pandemic has blown this trend out of the water. In fact, the National Association of Realtors (NAR) found the total loss in office occupancy to be 133 million square feet since 2020 Q2. Office attendance is now at a steep decline with employers and employees alike supporting working remotely in a location of the employees' choice.

This offers flexibility to workers and cost savings for employers on things like rent, furniture, and office supplies. With a large portion of the workforce transitioning to remote or hybrid work and employers downsizing their rental space requirements, we're seeing significant office vacancies from now into the foreseeable future.

3. Industrial Space & Warehousing

Industrial spaces and manufacturing warehouses are the property types that saw the biggest growth in 2021. This was due to the fact that these types of spaces were able to adapt quickly to the changing needs of businesses during this recent crisis. While some of these spaces may not see as much growth in the future, they will continue to serve as a valuable asset for CRE owners who can capitalize on them.

4. Mixed-Use Properties

A trend that is growing, and will continue to grow down the line, is the value of mixed-use properties. With convenience high on the list of many communities and urban developments, properties with two or more uses are seeing massive growth in the commercial real estate sector. All-in-one vertical properties mixing residences, co-working spaces, and lifestyle enhancement are in demand by millennials and baby boomers alike. A mixed-use development tends to be more sustainable as well, which is a top emerging focus for commercial real estate investors.

5. More Investment Competition

Investors and private buyers alike are taking advantage of lower interest rates. With a scarcity of residential properties, especially in urban developments, high net-worth investors are buying up commercial properties. With such a high demand and dwindling supply, the competition for CRE opportunities is high. The window is closing to take advantage of current interest rates and remaining investment properties.

6. Restaurant and Retail Spaces Will Suffer

Restaurants and retail in urban and rural areas have already taken a massive hit over the past two years, due to the pandemic. Areas that typically saw a lot of office workers and commercial buildings, like downtown areas and office complexes, are going to continue to see a lot of retail and restaurant closures and downsizing. With fewer employees being housed in large office spaces and more people working remotely, there are fewer people visiting shops and restaurants in urban metro areas. This will continue to contribute to more building vacancies in metropolitan areas compared to the suburbs where you’re starting to see restaurants starting to recover.

What Do These 2022 Commercial Real Estate Trends Mean For You?

Although the landscape has shifted across the commercial real estate sector, there is and will continue to be a growing demand for commercial investments. However, your investment choices and the way you manage your portfolios will look a lot different than before the global pandemic. In light of these events, investors should take note of these trends and ensure they account for them when making investment decisions.

At Lavoro Consulting, we can not only help you understand the current market conditions, but we can use them to your benefit. If you're thinking about investing in real estate, we'd be happy to help! Contact us for a free initial consultation.

And if you’re looking to restructure your current office space and lease to suit your evolving business needs, then you may want to talk to our experienced tenant rep and office fit-out specialists.