2022 Poised for Greatness with a Focus on a Continued Retail Rebound
With all that’s going on in the world and as we enter the third year of the COVID-19 pandemic, there’s an awful lot happening to dampen our spirits. But I can promise you, there’s one thing to be really excited about this year: commercial real estate investing will have a huge (if not record-breaking) year.
We’re coming off a very healthy year for CRE investing but the inventory of quality investment properties remains low. This means investors are chomping at the bit for opportunities, standing on the sidelines with pockets full of cash just waiting for the right property to hit the market. Couple that with low interest rates that should hold steady most of this year, and it’s clear why CBRE is projecting investment volumes to increase 5% - 10% in 2022.
CRE investors aren’t the only ones with a surplus of cash and pent-up demand; consumers also spent the pandemic building their personal savings, and they’re now eager to spend it somewhere. This bodes well for the retail sector; consumer spending is forecast to rise in 2022, and travel from international countries should rebound, giving an added boost to retailers in tourist destinations.
A year ago, I wrote a blog about how retailers could survive the pandemic, and the first two years of the pandemic did in fact weed out the poorly performing retailers, leaving the most resilient retailers standing. The retailers that survived are catching the eye of investors. In 2021, REITs increased their acquisitions and grocery-anchored retail centers attracted $5 billion in investment activity in the US in Q3 2021, marking the second-most active quarter in the last decade. In addition to grocery-anchored centers, QSR’s with drive-thrus, banks, drug stores, and small single-tenant retail buildings will be favorable investment opportunities in 2022.
Certain retail properties are trading at lower cap rates than before the pandemic, which is driven by lack of inventory, increased investor demand and low interest rates. I anticipate that investors will be aggressive in 2022 and attractive investment properties will move at lightning speed. It appears that this year will be positive not only for sellers, who are taking advantage of the demand, but also buyers who are desperate for a good investment, and retailers who will benefit from the influx of consumer spending.
Justin Langlois, CCIM is a Commercial Real Estate Investment Advisor with Stirling Properties servicing Baton Rouge, Louisiana and surrounding markets. Please reach out to Justin to discuss your real estate investment strategies.