Commercial Real Estate Market
Commercial Real Estate in 2021: What We're Watching
The pandemic continues to shakeup commercial real estate. Here are the trends we're following.
The COVID-19 pandemic changed every aspect of our lives from the way we live, to the way we work, to how and what we buy. These everyday shifts changed the way we interact with the world, including the use of commercial real estate in the U.S.
Here are commercial real estate trends we’re following:
New Normals Lead to High Demand for Healthcare Real Estate
COVID-19 brought extremes for the healthcare industry over the past couple of years leading to many changes, including an increase in demand for healthcare real estate. For one, telehealth is on the rise. Despite what you may believe, telehealth does not reduce the amount of office space needed for healthcare practices. According to Coldwell Banker Richard Ellis (CBRE) telehealth acts as a supplement to in-person care and not a replacement, which means there will be the same amount of patients accessing healthcare facilities. Instead, administrative areas will be reconfigured to allow for maximum telehealth appointments, explains Tech Times.
Another change, according to CBRE's Medical Office Trends Report is a location change needed for facilities in lower-cost, off-campus facilities that are closer to where patients are living. This means a greater focus on areas outside of urban cores, as well as an increase in demand in the sunbelt where there is a rise in population for the sunny weather, a lower cost of living and an increase in job opportunities, according to Million Acres.
Due to COVID-19, many healthcare businesses were closed or unable to do elective procedures for the majority of 2020. As a result, owners of healthcare businesses have less cash on hand than after a typical year of business and are currently having to get creative in terms of capital that can be used right away. This is leading to an increased interest in sale-leasebacks in the medical real estate space, according to HB Real Estate . Sale-leasebacks allow for healthcare companies to stay in their facilities by leasing back their own property, with an influx of capital in hand. This newly gained capital allows for more nimble business decisions including opening up additional locations to keep up with market demands.
E-Commerces leads to massive Industrial Demand
COVID-19 brought a tidal wave of e-commerce flooding the retail space, leading to one of the biggest shifts in retail in U.S. history. This large-scale shift to e-commerce has resulted in a much higher demand for industrial real estate. Storage, warehousing, and logistics are now a top concern for retailers, with CBRE noting that suppliers are increasing from keeping an average of a 15-day supply to a 60-day supply to help with supply chain disruptions and demands. There is also to be an expected 250 million square foot increase in warehouse space in 2021.
This new, high demand for industrial spaces is bringing an increase in CRE investment to industrial properties, as well as an increase in retail-to-industrial conversion projects.Thanks to retail to industrial real estate being the fastest growing conversion category of real estate, for business owners with this kind of property, now is this time to cash in to receive maximum value for the property, according to CBRE’s Retail Outlook Report.
For retail owners going through the e-commerce growing pains themselves, selling to an investor like KeyWay provides the ability to continue leasing your own space, while gaining capital to expand your business in the necessary ways that e-commerce presents whether that is acquiring more industrial space or getting ahead on inventory.
Quality Design Takes Precedence in Offices
While it is too early to tell what the exact long-term effects of COVID-19 will be, we know office spaces will be used in a fundamentally different way than they were before. With the rise of remote and hybrid work, stats show a potential 15% decrease in overall square footage of office space needed in the U.S., according to CBRE. Instead of the historical focus on square footage, office spaces are being reimagined as places for companies to meet and collaborate, not for individual work.
Location, Location, Location
However, COVID-19’s impact on office space is dependent on location with the sunbelt faring the best because it continues to attract investments, according to Globe St. The sunbelt, including U.S. southern and western metropolitan areas, are the most popular destinations for investments with Dallas, Houston, Atlanta, and Austin all being at the top of the list because of their multifamily, industrial, and retail property markets, according to Commercial Market Insights.
How Keyway Can Help
Keyway is simplifying how commercial real estate works for small and medium-sized businesses. Whether you want to open a new location or sell an existing one, Keyway’s solutions combine data, intelligence and capital to help you achieve your goals.
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