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2022 Projected to be Promising Year for Commercial Real Estate



We are quickly approaching the end of 2021 and looking forward to what next year might hold for commercial real estate. I’ve spoken in the past about how I expected the COVID-19 recovery to be V-shaped, and that is proving to be true.


Many businesses have emerged from the other side of the pandemic with less financial burden than originally anticipated, and recovery is happening at a rapid pace. Despite retail, restaurants, and office buildings being hit hard, developers, builders and investors are reporting record numbers, and investor sentiment is at pre-COVID levels.


According to numbers from a recent Investor Sentiment Survey by Marcus & Millichap, more than a third of investors surveyed say their properties are operating better than before the pandemic. Given the current liquidity in the market, financing is available for most CRE sectors and more than 50% of investors say they have a surplus of capital ready to invest.


This available capital will most likely be invested over the next 12 months, if investors can find properties in this competitive market. 55% of responders in the Marcus & Millichap survey say they plan to increase their CRE holdings over the course of the next year. With the expectation that interest rates will inevitably rise in 2022, investors are motivated to invest their capital now, while the spread between interest rates and cap rates is ideal.


At this point, it shouldn’t be breaking news that the industrial sector is the darling of commercial real estate. In addition to industrial properties, other property types that weathered the COVID-19 storm include multifamily and self-storage. Survey respondents indicated they believe it’s a good time to invest in all three of these property types and expect property values to rise over the next 12 months.


Optimism continues when we look at hotels and senior housing, which were hit harder by the pandemic. Nearly half of the investors surveyed by Marcus & Millichap expect hotel values to rise in the coming year with an average gain of 4.3%. These numbers are even higher for senior housing, with 60% of survey respondents anticipating a 6.7% rise in value in 2022.


There are a couple points of concern to monitor over the coming months, including potential tax hikes and the possible elimination of the 1031 tax-deferred exchange. These concerns coupled with rising interest rates make investing sooner rather than later an even more attractive prospect.

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.

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