Commercial Real EstateTrends & OutlookApril 2021National Association of REALTORS® Research Group
The commercial real estate market is recovering but remains weak compared to conditions before the COVID-19 pandemic, according to NAR commercial members who responded to the 2021 Q1 Commercial Real Estate Quarterly Market Survey and industry data.
Acquisitions for large commercial real estate―properties or portfolios of at least $2.5 million ― fell 28% year-over-year in the first quarter of 2021, with transactions declining across all property types, except for hotel acquisitions. Investors could be acquiring hotels to convert into other uses such as multifamily housing.
Among commercial members of NAR who participated in the quarterly market survey and whose acquisitions were typically properties or portfolios of less than $2.5 million, transactions declined by an average of 1%. Respondents reported an increase in sales of land and industrial properties and a decline in sales of other types of commercial real estate.
Commercial real estate prices continue to firm up, but the value of commercial real estate is still broadly down by 6% compared to one year ago.
A majority of NAR commercial members who responded to the 2021 Q1 commercial survey―70% ― reported that companies are leasing or moving into office with small square footage due to working from home.
The commercial real estate market’s recovery will remain uneven in 2021. Commercial members of NAR who responded to the survey anticipate a modest increase in sales of land (5%), industrial warehouses (3%), and Class B/C apartments (1%), but anticipate a decline in sales transactions of retail, office, and hotel/hospitality properties in the next 12 months.
However, commercial real estate transactions should experience a stronger recovery across all sectors in 2022 as more businesses operate at normal capacity, a larger fraction of the workforce returns to the office, and as business and leisure travel picks up strongly in 2022 with the broad swath of the population fully vaccinated, and assuming there is no resurgence of deadlier COVID-19 variants.
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COMMERCIAL REAL ESTATE TRENDS & OUTLOOKApril 2021 Report
Commercial Sales Transactions Down 28% from One Year Ago
As businesses continue to operate below normal capacity and with people and businesses still holding back on travel and recreation with COVID-19 vaccinations still underway, commercial sales transactions continued to decline in the first quarter of 2021.
Commercial transactions of $2.5 million and above decreased 28% from one year ago, according to Real Capital Analytics. Transactions were down across all property types except for hotel properties where acquisitions rose 13%. Investors could be acquiring some hotels to be converted into other uses, such as multifamily housing. Apartment buildings accounted for a third of the closed transactions.
In the small CRE market where transactions are less than $2.5 million, NAR commercial members who participated in the 2021 Q1 Commercial Real Estate Quarterly Survey reported that their sales transactions volume in the first quarter of 2020 contracted on average by 1% compared to the level one year ago. Respondents reported an increase in acquisitions for industrial properties and all types of land, with strong growth in sales of residential and industrial land.
3NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
1 | COMMERCIAL SALES
-1%
-28%
-80%
-60%
-40%
-20%
0%
20%
40%
2018
.Q1
2018
.Q2
2018
.Q3
2018
.Q4
2019
.Q1
2019
.Q2
2019
.Q3
2019
.Q4
2020
.Q1
2020
.Q2
2020
.Q3
2020
.Q4
Quarterly Sales Volume (YoY % Change) as of 2021 Q1
REALTOR® CRE Markets $2.5+M Market
-4%-3% -3% -3%
-2% -2% -1%-1%
0%1% 2%
3%
YoY % Change in the Dollar Commercial Sales Volume in 2021 Q1 Among NAR
Commercial Members
$2.5 Million or More Transactions
Vol ($b) YOYOffice 20.5 -36%Retail 7.8 -42%Industrial 19.6 -41%Hotel 5.6 13%Apartment 35.5 -12%Seniors Housing & Care 3.3 -8%Dev Site 4.3 -40%Total 96.7 -28%
Q1 '21
1%1% 2% 2%
3%4% 4%
5% 6%
7%
YoY % Chg of Land Sales Among NAR Commercial Members in 2021 Q1
Real Capital Analytics
4NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
1 | COMMERCIAL SALES
For deals of $2.5 million or more, Boston, Dallas, Los Angeles, Atlanta, and Phoenix closed the most deal volume in the first quarter of 2021. Except for Boston, the top five markets are all non-gateway cities.
In Boston, the bulk of the deals were for office properties. In Dallas, Los Angeles, Atlanta, and Phoenix, a large component was for apartment properties.
Distressed Sales at 2% of Total Transactions
Among transactions of $2.5 million or over, distressed sales accounted for less than 2% of sales. Despite the rise in vacancy rates, there are little distressed sales compared to the Great Recession when distressed sales made up nearly 20% of sales. One reason is that investors like REITS are less leveraged this time compared to the Great Recession. During the Great Recession, the debt to total market capitalization (debt plus equity) of equity REITS market hit a peak of 57.5%.1 As of March 2021, the debt to equity ratio is at 32.3%, according to Nareit.2
$6.6$5.8
$4.7$4.3$4.3
$2.8$2.6
$2.2$2.2$2.2
$2.0$1.9
$1.8$1.6$1.6$1.5$1.5$1.5$1.5$1.4
$1.3$1.2$1.2$1.1$1.1$1.1$1.1$1.0$1.0
BostonDallas
Los AngelesAtlanta
PhoenixSeattle
HoustonNo NJ
ChicagoAustin
San FranciscoDenver
Miami/Dade CoEast Bay
ManhattanSan Jose
BaltimoreInland Empire
Orange CoSan DiegoCharlotte
OrlandoDC VA burbs
TampaPalm Beach Co
PortlandRichmond/Norfolk
NYC BoroughsSalt Lake City
Commercial Transactions of $2.5M or Over Closed in 2021 Q1 in Billion Dollars
1.8%0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
07Q
10
8Q1
09Q
110
Q1
11Q
112
Q1
13Q
114
Q1
15Q
116
Q1
17Q
118
Q1
19Q
120
Q1
21Q
1
Distressed Sales as a Percent of Total Sales of Properties $2.5 Million or Over
Real Capital Analytics
Real Capital Analytics
1 Nareit, https://www.reit.com/news/blog/nareit-media/equity-reits-have-lowest-debt-ratio-20-years2 Nareit, https://www.reit.com/sites/default/files/2021-04/MediaFactSheet_Mar-2021.pdf
Commercial Prices are Recovering But Still Down 6%
Commercial real estate prices continue to firm up, but the value of commercial real estate is still broadly down by 6% compared to one year ago, based on the Green Street Commercial Price Index, an appraisal-based index of the properties held by REITs. The decline has tapered off from the 10% decline in the second quarter of 2020.
Among closed transactions valued at $2.5 million or over, sales prices rose 6.7% from one year ago, according to Real Capital Analytics.
Among closed transactions of NAR commercial members which are typically below $2.5 million, sales price rose by 2% on average. Respondents reported strong price gains for land (+6%), industrial warehouses (+5%), and class B/C apartments (+5%). Sales prices of residential land were up 9% on average, according to NAR commercial members.
5NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
2 | COMMERCIAL PRICES
2.0%
6.7%
-5.6%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
2018
.Q1
2018
.Q2
2018
.Q3
2018
.Q4
2019
.Q1
2019
.Q2
2019
.Q3
2019
.Q4
2020
.Q1
2020
.Q2
2020
.Q3
2020
.Q4
2021
.Q1
Y/Y % Change in Commercial Property Prices
REALTOR® CRE Markets % Chg Y/Y$2.5M+ MarketGreen Street
-4%
-2% -1% -1%-1%
2% 2%
3%5% 5% 5%
6%
YoY % Change of Sales Prices of Commercial Acquisitions Typically
Below $2.5 Million in 2021 Q1
2%
3%4% 4% 4% 4%
5%6%
6%
9%
YoY % Change in Land Sales Prices in 2021 Q1 For Properties Typically Below
$2.5 Million
Cap Rates on the Decline
As commercial prices continue to firm up, cap rates continued to decline. Apartment acquisitions had the lowest cap rate of 4.9%, followed by industrial at 5.9%. Hotel properties had the highest cap rates, at 8.6%. Office cap rates were at 6.6% .
Risk spreads (cap rate less 10-year T-note) for office, retail, industrial and hotel have also trended downwards and cap rates are now at about the same level in 2021 Q1 compared to one year ago. However, the market is still thin so these cap rates reflect transactions that are likely of prime properties or that are expected to yield good cash flows when redeveloped or put to other uses than the current revenue flows at the existing use.
The cap rates for properties typically below $2.5 million tend to be higher than cap rates of properties that are typically valued at $2.5 million or over. NAR commercial members reported the lowest cap rate for Class A apartment properties, at 5.7%, on average. Office acquisitions had a cap rate of 6.5% on average. Hotel and retail mail acquisitions had the highest cap rates, at over 8%, on average.
6NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
2 | COMMERCIAL PRICES
3.6%4.5%5.3%
7.3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
01Q
10
2Q3
04
Q1
05Q
30
7Q1
08Q
310
Q1
11Q
313
Q1
14Q
316
Q1
17Q
319
Q1
20Q
3
Risk Spreads for Properties $2.5 Million or Over (Cap Rates Less 10-Year T-Bond)
Apartment Industrial
Retail Office
Hotel
Cap Ratesfor in 2021 Q1
Office: Class A 6.5Office: Class B/C 7.2Industrial: Warehouse 6.8Industrial: Flex 6.8Retail: Strip center 7.1Retail: Mall 8.1Retail: Free-standing 6.8Apartment: Class A 5.7Apartment: Class B/C 6.4Hotel/Hospitality 8.2Senior housing 7.5Land 6.0Source: 2021 Q1 NAR CRE Market Survey
For $2.5 million or less properties
Properties Typically Less than $2.5 M
Source: Real Capital Analytics
Cap Rates in 2021 Q1 Properties $2.5 M or More
Office 6.6%Industrial 5.9%Retail 6.7%Apartment 4.9%Hotel 8.6%Seniors Housing & Care 7.0%Source: Real Capital Analytics
Leasing Activity for New Leases and Renewals Continues to Fall in 2021 Q1
For the fifth consecutive quarter, the dollar volume of new leases and renewals among properties leased or managed by NAR commercial members who responded to the survey fell by 2% on average in 2021 Q2.
Office Occupancy Continues to Fall While Industrial Occupancy Rises in 2021 Q1
For the fourth consecutive quarter, office absorption was negative (-41.1 MSF), bringing the total negative net absorption since 2020 Q2 to 138.4 million square feet (MSF), according to Cushman and Wakefield market data. Office vacancy continued to rise to 16.4% from 13% in 2020 Q1.
On the other hand, occupancy in industrial spaces rose 82.7 million square feet in 2021 Q1 and totaled 309.7 million square feet during in the past four quarters. The increase in industrial absorption offsets the negative net absorption in the office sector (-138.4 million square feet (MSF).
7NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
3 | LEASING
-2%
-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%12.0%
2018
.Q1
2018
.Q2
2018
.Q3
2018
.Q4
2019
.Q1
2019
.Q2
2019
.Q3
2019
.Q4
2020
.Q1
2020
.Q2
2020
.Q3
2020
.Q4
2021
.Q1
YoY % Change in Commercial Leasing Dollar e Among NAR Commercial
Members
16.4%
0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%20.0%
-50.0-40.0-30.0-20.0-10.0
0.010.020.030.040.050.0
1995
Q1
1996
Q4
1998
Q3
200
0 Q
220
02
Q1
200
3 Q
420
05
Q3
200
7 Q
220
09
Q1
2010
Q4
2012
Q3
2014
Q2
2016
Q1
2017
Q4
2019
Q3
Net Absorption (Million Square Feet) and Office Vacancy Rate
Sources: Cushman and Wakefield
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
-80-60-40-20
020406080
100120
1995
Q1
1997
Q2
1999
Q3
200
1 Q4
200
4 Q
120
06
Q2
200
8 Q
320
10 Q
420
13 Q
120
15 Q
220
17 Q
320
19 Q
4
Mill
ion
s
Absorption of Industrial Space and Vacancy Rate
8NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
3 | LEASING
30.9%25.1%
22.7%22.2%22.1%22.0%21.6%21.5%21.0%20.5%20.0%20.0%20.0%19.9%19.6%19.4%19.1%18.7%18.7%18.7%18.6%18.5%18.2%18.1%18.1%17.8%17.2%17.1%17.0%16.9%16.8%16.6%16.4%
Fairfield CountyHouston
New York - BrooklynColumbus
AtlantaDallas
Los Angeles CBDMinneapolis/St. Paul
PhoenixChicago
Northern New JerseyMilwaukee
Suburban MDCincinnati
HartfordColumbia
Central New JerseySan Francisco
Northern VADenver
IndianapolisLos Angeles Non-CBD
AustinJacksonville
NashvilleWashington
SeattleMiami
New York - Midtown…Birmingham
New York - MidtownSalt Lake City
Buffalo
Vacancy Rates as of 2021 Q1
13.0%13.0%12.8%12.6%12.4%12.2%12.2%12.1%
11.3%10.9%10.9%
10.4%10.3%
9.9%9.9%
9.3%9.1%9.0%9.0%
8.6%8.5%
8.0%7.8%7.7%
6.7%6.5%6.2%5.9%
SyracuseOrlando
San Francisco North BaySacramento
RenoLong Island
San Mateo CountyProvidence
TulsaCharleston
Greensboro/Winston-…New Orleans
GreenvilleSavannah
Puget Sound - EastsideTucson
FredericksburgInland Empire
Southern NHColorado SpringsHampton Roads
BoiseRichmond
El PasoCleveland
BinghamtonRoanoke
Fort Myers/Naples
Vacancy Rates as of 2021 Q1
Office Occupancy Continues to Fall in 2021 Q1
Major and/or gateway cities experienced vacancy rates above the national rate (16.4%) such as Fairfield County (Connecticut), New York, Chicago, Washington DC, Dallas, Houston, Los Angeles, San Francisco, and Seattle.
On the other hand, smaller or tertiary cities such as Fort Myers, Cleveland, El Paso, Richmond, Boise, Colorado Springs, Tucson, Puget Sound, Savannah, and Sacramento had office vacancy rates of less than 10 percent.
Office Asking Rents Up 5% But Landlords are Providing Concessions
While office occupancy has fallen, asking rents were up 5% year-over-year. Asking rents have not declined but most landlords have been providing tenant concessions. Fifty-five percent of NAR commercial members who responded to the latest quarterly commercial survey reported that they are seeing more tenant concessions compared to the pre-pandemic period.
In the areas with high vacancy rates, asking rents have are still depressed, such as in San Francisco (-12%) and New York Midtown South (-9%). But in cities with low office vacancy rates, asking rents have sharply increased, such as In Fort Myers/Naples, Roanoke, Colorado Springs, El Paso, Sacramento, with asking rents at over 10%.
9NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
3 | LEASING
-12.0%-8.8%
-4.6%-3.9%-3.6%
-2.8%-2.8%-2.3%
-1.7%-1.7%-0.9%-0.9%-0.9%-0.8%-0.7%-0.6%-0.6%-0.4%-0.3%-0.2%-0.1%-0.1%
San FranciscoNew York - Midtown SouthPortlandBostonFort WorthNew York - DowntownNew HavenSeattleBinghamtonOrange CountyNorthern VADallasJacksonvilleSt. Petersburg/ClearwaterHartfordHoustonTulsaNew York - MidtownLong IslandBaltimoreWashingtonSalt Lake City
Year-over-year Percent Change in Office Asking Rent
4.0%4.2%4.2%4.2%4.4%4.8%4.8%4.9%5.0%5.1%5.1%5.3%5.5%5.7%5.8%6.0%6.5%6.8%6.8%8.4%9.4%
11.8%12.9%
15.0%17.4%
20.4%23.4%
Puget Sound -…San Francisco North…
CharlotteAtlanta
Raleigh/DurhamCharleston
TucsonMinneapolis/St. Paul
ChicagoSyracuse
SavannahSouthern NH
Fort LauderdaleLos Angeles Non-CBD
MilwaukeeOakland/East Bay
OmahaHampton Roads
GreenvilleAustin
NashvilleSacramento
El PasoSan Jose
Colorado SpringsRoanoke
Fort Myers/Naples
Year-over-year Percent Change in Office Rent
Sources: Cushman and Wakefield
Industrial Occupancy Continues to Increase in 2021 Q1
During 2021 Q2 through 2021 Q1, Atlanta saw the largest increase in net absorption of industrial space, followed by the Inland Empire, Pennsylvania I-87/79 corridor, Chicago, and Dallas.
Industrial vacancy rate declined to 4.9 percent. The areas with the lowest vacancy rates include Providence, Orange County, Los Angeles, Philadelphia, and the New Jersey-Central area, Nashville, Boise, Reno, Tulsa, and Hampton Roads Virginia.
10NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
3 | LEASING
Sources: Cushman and Wakefield
29.024.9
23.019.518.818.2
16.410.510.310.09.38.7
7.67.57.3
6.15.25.24.84.74.34.24.14.03.83.73.43.43.02.92.62.52.12.0
Atlanta, GAInland Empire CA
Pennsylvania I-81/I-78Chicago, IL
Dallas/Ft. Worth, TXPhoenix, AZHouston, TX
Memphis, TNIndianapolis, IN
New Jersey - CentralKansas City, MO
Columbus, OHLouisville, KY
Savannah, GAMilwaukee, WI
Philadelphia, PASt. Louis, MO
Salt Lake City, UTBaltimore, MDCincinnati, OH
Orlando, FLReno, NV
Los Angeles, CALas Vegas, NV
Boise, IDNashville, TN
San Antonio, TXDenver, CO
Jacksonville, FLMinneapolis, MN
Lakeland, FLAustin, TX
Charlotte, NCMiami, FL
Industrial Net Absorption 2020 Q2-2021 Q1 in Million Square Feet
0.1%1.9%2.0%2.2%2.3%2.3%
2.5%2.8%2.8%2.8%
3.0%3.0%3.1%3.2%3.2%3.3%3.5%3.5%3.6%3.8%3.8%
Providence, RIOrange County, CA
Los Angeles, CAPhiladelphia, PA
New Jersey - CentralNashville, TN
Boise, IDReno, NVTulsa, OK
Hampton Roads, VARichmond, VA
Inland Empire CAGreensboro/Winston-…
Omaha, NEFort Myers/Naples FL
Portland, ORSavannah, GA
New Jersey - NorthernMilwaukee, WI
Long Island, NYCleveland, OH
Industrial Vacancy Rate in 2021 Q1
Trend Towards Smaller Square Footage, Shorter Term Leases, and More Suburban Leases
During the COVID-19 pandemic, working from home became the norm. A majority of NAR commercial members who responded to the 2021 Q1 commercial survey―70% ― reported that companies are leasing or moving into office with small square footage due to working from home.
More than half of respondents― 57% ―reported that they are seeing more short-term leases of less than 2 years compared to the case prior to the pandemic.
More than half of respondents ― 55% ―reported that more tenants are offering rent concessions, compared to the case prior to the pandemic.
While less than a majority of respondents reported ― 47% ― reported having more sales or leasing transactions in the suburban areas compared to the case prior to the pandemic, the rising share of respondents indicates an increasing preference of investors for properties in the suburbs than in the central business districts.
11NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
3 | LEASING
59%
63%
57%
2020.Q3 2020.Q4 2021.Q1
Percent of REALTOR®respondents who reported "More" short-term office leases
of 2 years or less
62%
69%70%
2020.Q3 2020.Q4 2021.Q1
Companies leasing or moving into offices with smaller square
footage due to working from home
65% 65%55%
2020.Q3 2020.Q4 2021.Q1
Percent of respondents who reported "More" landlords offering tenant rent
concessions compared to January 2020
43%
46%47%
2020.Q3 2020.Q4 2021.Q1
Percent of respondents who reported "More" sales or leasing transactions in
suburban area vs. central business district compared to January 2020
More Residential and Industrial Development
Commercial members of NAR who are engaged in construction/development reported that on average, their construction activity (in square feet) was up 1% from one year ago. On average, respondents reported a 12% year-over-year increase in construction activity (in square footage) for industrial warehouses. Construction activity was also up by 6% for Class A apartments ad 2% higher for Class B/C. However, construction activity for retail malls, office, hotel, retail, and senior housing declined.
Respondents of the 2021 Q1 survey reported that obtaining construction materials and getting permits were the main factors causing construction delays, with half of respondents citing these causes. Hiring workers was cited by a third of respondents. Obtaining was cited by only less than 1 in 5 respondents, which indicates that obtaining financing is not a major issue for developers.
Delays were typically up to 3 months. No respondents to the 2021 Q1 survey reported a delay of more than 6 months.
12NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
4 | CONSTRUCTION
12%
6% 6%2% 1%
0%-3% -5%
-9% -11%
0%
Ind
ust
rial
: War
ehou
se
Ap
artm
ent
Cla
ss A
Ind
ust
rial
: Fle
x
Ap
artm
ent
Cla
ss B
/C
Ret
ail:
Free
-sta
nd
ing
Off
ice
Cla
ss A
Ret
ail:
Stri
p C
ente
r
Off
ice
Cla
ss B
/C
Hot
el/h
osp
ital
ity
Ret
ail:
Mal
l
Sen
ior
hou
sin
g
YoY % Change in Construction Projects (in sq.ft) in 2021 Q1
18%
18%
32%
50%
50%
Other
Obtaining lender financing
Hiring workers
Getting permits
Obtaining constructionmaterials
Percent of NAR Commercial Member Respondents Who Reported These Causes of Delay in 2021 Q1 Survey
21%
54%
25%
0%
No delay
Up to 3 months
Up to 6 months
More than 6 months
Construction Delays Reported by NAR Commercial Members Engaged in
Development in 2021 Q1 Survey
Repurposing Vacant Malls
Vacant malls are being converted into other uses. In the 2021 Q1 survey, 39% of the reported responses were conversion of the vacant mall into a mixed –use project. The next most prevalent reuse was as a distribution center, a church, or a self-storage facility.
In 2020, NAR compiled a list of case studies on the conversion of vacant malls to other uses to provide a blueprint on how to finance the conversion and how state and local governments can support the conversion of vacant malls to other uses. Download the report here.
13NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
4 | CONSTRUCTION
39%25%
21%20%
19%17%
12%9%
8%4%
2%25%
Mixed-use (residential , retail, office)Industrial use: Distribution/fulfillment center
ChurchSelf-storage
Health care/hospital/medicalOffice space
Multifamily/residentialGovernment building (office, police precinct)
College/university officeHealth armory
Sports stadiumOther
How are vacant malls being repurposed in your market? 2021 Q1 Survey
14NATIONAL ASSOCIATION of REALTORS® | RESEARCH GROUP | www.nar.realtor/research-and-statistics
5 | COMMERCIAL OUTLOOK
-3%-2%
-1%-1%-1%-1%-1%0%
1%2%
3%5%
Retail: MallHotel/HospitalityRetail: Strip CenterOffice Class B/CRetail: Free-standingOffice Class AApartment Class ASenior housingApartment Class B/CIndustrial: FlexIndustrial: WarehouseLand
Expected Change in Dollar Sales Volume in the Next 12 Months Among
NAR Commercial Members
NAR Commercial Members Expect More Sales Transactions in Land, Residential, and Industrial Properties
Commercial members of NAR who responded to the survey anticipate a modest increase in sales of land (5%), industrial warehouses (3%), and Class B/C apartments (1%) in the next 12 months. Respondents anticipate a decline in sales transactions for retail, office, and hotel/hospitality properties.
Pertaining to land sales, respondents anticipate strong sales growth for residential land (8%), industrial land (7%), and recreational land (5%), as well as agricultural land (5%).
Respondents expect commercial prices to increase in the next 12 months across most property types, except for office, retail, and hotel properties.
5%1%
2%3%3%3%
4%5%5%
7%8%
OtherDevelopment-BrownfieldAgri, cultivable, non-irrig.
TimberDevelopment-Greenfield
For office/retail/hotelRanch
Agri, cultivable, irrig.Recreational
IndustrialResidential
Expected Change in Dollar Land Sales in the Next 12 Months Among NAR
Commercial Members
-5%-2%-2%
-1%-1%
0%3%
4%5%5%5%6%
Retail: MallHotel/HospitalityOffice Class ARetail: Strip CenterOffice Class B/CRetail: Free-standingSenior housingApartment Class AApartment Class B/CIndustrial: FlexIndustrial: WarehouseLand
Expected Change in Commercial Prices in the Next 12 Months Among NAR
Commercial Members
2%3%3%3%4%
5%6%6%
7%10%
Development-BrownfieldFor office/retail/hotel
Development-GreenfieldAgri, cultivable, non-irrig.
TimberAgri, cultivable, irrig.
RanchRecreational
IndustrialResidential
Expected Change in Land Prices in the Next 12 Months Among NAR
Commercial Members
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All Rights Reserved. May not be reprinted in whole or in part without permission of the National Association of REALTORS®. For question about this report or reprint information, contact [email protected].
Download report at: https://www.nar.realtor/commercial-real-estate-market-survey
COMMERCIAL REAL ESTATE TRENDS & OUTLOOK April 2021
NAR RESEARCH GROUP Lead Team
Research and Analysis
LAWRENCE YUN, PhDChief Economist & Senior Vice President for Research
GAY CORORATON Senior Economist & Director of Housing and Commercial Research
BRANDON HARDIN Research Economist
MEREDITH DUNNManager, Research
ANNA SCHNERREResearch Associate, Business Insights
This report is based on information collected from NAR’s 2021 Q1 Commercial Real Estate Quarterly Market Survey. The survey asks about the commercial transactions of REALTORS® and members of NAR’ commercial affiliate organizations (CCIM, SIOR, RLI, IREM, and the Counselors of Real Estate) during the fourth quarter of 2020. The survey was sent to approximately 76,000 commercial REALTORS® and members of affiliate organizations during April 1–22, 2021, of which 1,043 provided answers to at least one question. There were 346 respondents who reported a sales transaction, 153 respondents who reported a land sales transaction, 35 respondents who reported a leasing transaction, and 19 respondents who provided information on development transactions. Given the small sample size, the figures cited in this report should be treated with caution and should be interpreted as indicators of market trends rather than as accurate market statistics.
The NAR Research Group acknowledges the I/S/Cs for reaching out to their members to respond to the survey and developing the survey: Aubrie Kobernus, CEO, Realtors® Land Institute; Denise LeDuc-Froemming, CEO/EVP, IREM; Alexis Fermanis, Communications Director, SIOR; and Greg Fine, CEO/EVP, CCIM Institute. The Research Group also acknowledges Charlie Dawson, Vice-President, Engagement, and Rodney Gansho, Director of Engagement, in reaching out to CCIM, CRE, IREM, SIOR, and RLI designees to respond to the survey.
The National Association of REALTORS® is America’s largest trade association, representing more than 1.4 million members, including NAR’s institutes, societies and councils, involved in all aspects of the real estate industry. NAR membership includes brokers, salespeople, property managers, appraisers, counselors and others engaged in both residential and commercial real estate. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics. Working for America's property owners, the National Association provides a facility for professional development, research and exchange of information among its members and to the public and government for the purpose of preserving the free enterprise system and the right to own real property.
NATIONAL ASSOCIATION OF REALTORS® RESEARCH GROUP
The Mission of the NATIONAL ASSOCIATION OF REALTORS® Research Group is to produce timely, data-driven market analysis and authoritative business intelligence to serve members, and inform consumers, policymakers and the media in a professional and accessible manner.
To find out about other products from NAR’s Research Group, visit www.nar.realtor/research-and-statistics
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