What’s Next for Commercial Real Estate? – by Shelly Branscom
Industry News | Local News | NAI SunVista News | Office
As the nation begins to open up, children returned to the classroom, and international travel resumes, we can expect more of the same commercial real estate activity in 2022. According to NBC News, at the end of the first quarter of 2021, more than 70 countries are fully open to US travelers and tourists, while 16 are completely closed to Americans. The remaining countries fall somewhere in between. Most require a negative COVID-19 test, some sort of quarantine requirement and many have some sort of curfew in effect.
According to Moody’s Analytics REIS, transitions will affect all property types – including retail, hotel, office, industrial and multifamily. “Clarity is on the horizon.” Prices haven’t fallen enough to register real “transitions on any great scale and transaction volume has increased in the past few months.” In fact, an economist I heard speak indicated transaction volume is on the rise; especially in the tertiary markets where Cap Rates are higher than large cities.
Most companies, including Amazon, are targeting the second half of 2022 to return to the office. A CNBC report has indicated Google employees have to apply to work remotely for more than 14 days per year. On the contrary, Facebook and Twitter are allowing remote work indefinitely. Human Resources leaders across the nation are eyeing office reopening later in the year; likely 3rd Quarter. As more vaccinations reach the general public, leaders are re-assessing their position on exactly when employees across the nation can safely return. Here at home, many Albuquerque employers are fully open with employees coming and going from the office daily.
As growth in the life sciences sector hits historic levels, demand for lab space across the nation, and right here in New Mexico has exploded. “Insiders know that office absorption has been positive and rising for three quarters in a row,” says Marcus & Millichap’s researcher John Change. In fact, the Albuquerque office vacancy rate dropped to 13.85%, down 18 basis points from the previous quarter, and the lowest it’s been since 2009, reports Colliers International.
When assessing the space office users will need, the majority do not expect large reductions, rather many reported the need for a slight increase in space. Employers are still requiring employees to be present in the office at least part time. This requires space, and even if the share of desks becomes the norm, these desks are likely to be socially distanced. It is also probable that more collaborative space will be needed as office using employers lean toward brings in teams on the same days in the hopes of sparking creativity and innovation that my not be replicated on a virtual platform. Moody’s Analytics predicts the professional and business service sectors will grow by more than 20% over the next decade, a forecast that will bolster office demand.
Moody Analytic’s forecast is supported by the reports of significant gains of tenant office tours across the nation, both in person and virtually. While we saw some growth in demand the last half of 2020, the exponential increase in the first two months of 2021, combined with the announcement from the Biden Administration that all Americans are eligible for the vaccine, is providing confidence that a meaningful recovery is on the horizon. At some point, all things will go back to normal and it’s going to look more like the old normal than most people think.
Shelly Branscom, CCIM is an NAI SunVista commercial real estate specialist who provides substantial long-term strategies and business planning services to her clients. She prides herself on thinking outside the box, enabling her to contribute unique solutions and outcomes specific to each of her clients. Learn more about Shelly and her listings.
NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.