TOP 3 REASONS 2021 WILL SEE CRE GROWTH & WHAT THAT MEANS FOR EACH ASSET CLASS

TOP 3 REASONS 2021 WILL SEE CRE GROWTH & WHAT THAT MEANS FOR EACH ASSET CLASS

February 2nd, 2021 | Orange County, CA

With 2020’s uncertainty behind us, industry leading economists predict major economic and commercial real estate growth in 2021 and the years to come.

According to data from SVN Research & Chandan Economics, Real personal consumption expenditures grew at a seasonally adjusted 2.5% in 2020 Q4 and residential investments continue to grow at a seasonally adjusted annual rate of 63.0% in Q3 and remained high at 33.5% at the close of in Q4.

1. NEW COVID-19 RELIEF BILL

The White House has announced its $1.9T “American Rescue Plan”. The bill is aimed at addressing COVID-19 fallout by providing additional economic relief to households, small businesses, and State & Local Governments. This package is up for debate but it’s very likely that Americans will still receive stimulus, albeit slightly more conservative.

2. COVID-19 VACCINE

In addition to $1.9T Relief Bill, Biden signed an executive order invoking the Defense Production Act. The order is aimed at producing components for vaccine and speed up distribution. As of now, the bill is calling for investment in treating the virus, establishing occupational safety standards, and extending relief to nursing homes and higher education.

3. PENT-UP DEMAND

During 2020’s Q2, we saw countless deals fell out of escrow. This indicates that there is high demand for commercial property. According to Real Capital Analytics’ All-Property Commercial Property Price Index (CPPI), prices grew by 1.6% in December. This is up from the previous month and continues to grow at 7.3% year-over-year.

The combination of these 3 factors is set to bring consumers back to shopping centers and fuel tourism. Once people feel safe, they will start spending again. As the economy strengthens, companies will adapt to the changing landscape and create new strategies to navigate it.

If this growth continues, many economists are projecting a major real estate revival for all asset classes.

What this means for each product type:

MULTIFAMILY
Transaction activity is steadily returning to a normal pace in the Apartment sector. In Q4 2020, RCA tracked $56.7B worth of Apartment transaction volume, rising by 0.1% from the quarterly volume set in Q4 2019. Despite varying rent collections and uncertain demand dependability, prices rose 8.3% when compared to December 2019. With talks of extended landlord and rent relief programs, confidence in Multifamily should continue to steadily rise.

OFFICE
Prices rose in December by 0.8% from November. Compared to December 2019, Office sector prices rose 1.5%— the lowest annual increase since 2010. As the appeal of remote work dwindles, companies are reopening. We are likely to see a return to office, albeit downsized in some cases. Also included in the Biden administration’s proposal is a provision aimed at funding “1000,000 public health workers” through a national public health jobs program. This program could stimulate a need for office properties.

INDUSTRIAL
The industrial market remains strong through December, with prices rising by 0.6% month-over-month and up 8.8% from 2019 to 2020. This product type is seeing the highest annual growth rate.

RETAIL
Not surprisingly, retail is underperforming. From December to November, prices dropped by 0.1%. Since December 2019, prices in the Retail sector are down by 4.3%. As more of the population is vaccinated, loosening restrictions will help prices return to normal.

As with any important financial decision, it is crucial to have expert advisors on your side. Whether you are looking for Orange County commercial real estate for lease or you’d like to list an Orange County commercial property for sale, our team is experienced, knowledgeable, and ready to help you. Contact us today.



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