Despite the continued economic recovery and the accelerated vaccine distribution, commercial real estate acquisitions fell 59% in February as the lingering impact of the pandemic kept investors at the sidelines.
The dollar volume of acquisitions fell across all property classes: office (-71%), retail (-66%), industrial (-69%), hotel (-49%), and multifamily (-33%). On a year-to-date basis, acquisitions volume declined 53%.
In the apartment market, the main drag on confidence pertains to renters’ ability to pay the current rent and missed rent payments, especially among the unemployed, many of which work in COVID-19 impacted sectors such as retail, accommodation, leisure, food services, and office administrative services. In the office market, the effect of working from home on the demand for office space remains the big question mark for investors. In the retail market, the continued rise in electronic shopping remains the main drawback, although foot traffic in brick-and-mortar stores is likely to pick up once most of the population is vaccinated. Consumer and business spending for accommodation and food services will start to normalize once the population is vaccinated and with continued precaution and observance of safe practices to prevent a new surge in infections.
In summary, the commercial real estate market is still in dire straits but with the economy receiving continued fiscal and monetary support and with a vaccine distribution program that is targeted to be completed by this summer, the outlook for commercial real estate can only be better, not worse.
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Source: “March 2021 Commercial Market Insights“