REAL ESTATE TECHNOLOGY

National Association of Realtors: Why Industrial Spaces Lead Commercial Real Estate in Bouncing Back From COVID

National Association of Realtors (NAR) | March 28, 2022

Commercial real estate took a hit during the COVID-19 pandemic, as did many industries. But the market is starting to bounce back this year, largely due to increased investments in industrial properties.

According to research by the National Association of Realtors (NAR), commercial real estate transactions of less than $2.5 million fell by 1% in the beginning of 2021 and the value of commercial real estate properties fell by 6% compared to 2020.

Still, there is hope for the future as certain types of commercial properties are driving sales and seeing positive growth from the year before.

Here's a closer look at how industrial spaces are helping commercial real estate bounce back from COVID-19.

Spend on industrial properties and land increased
Sales for all types of commercial real estate decreased in 2021, with the exception of three categories: land (+3%), industrial warehouses (+2%), and industrial flex spaces (+1%).

That means, while businesses were shying away from commercial real estate lending for apartment buildings, offices, retail shops, and hotels, they were still spending money on industrial properties and land on which they could build their own structures.

Prices rose for industrial properties, land, and apartments
The number of commercial real estate transactions may have dropped, but sales prices increased by 2% on average. Specifically, prices for land increased by 6%, industrial flex spaces and warehouses by 5%, and certain types of apartment buildings by 5%. Meanwhile, sales prices declined for retail shops, offices, and hotels.

Industrial and residential construction projects grew
Commercial development projects are also on the rise for industrial and residential properties. Construction activity is up 1% from last year with a whopping 12% jump in construction for industrial warehouses, a 6% increase for industrial flex spaces, and a 6% growth for certain types of apartment buildings.

Vacant malls, for example, are being converted into new types of commercial spaces, such as mixed-use buildings for residential, retail, and office purposes, as well as industrial buildings for distribution and fulfillment processes.

Construction activity for retail spaces, offices, and hotels, on the other hand, dropped. Survey respondents noted certain obstacles to reaching their construction goals, including accessing materials, obtaining permits, and hiring workers.

Office real estate activity shrunk due to remote work
Office spaces, in particular, saw a decrease in real estate activity, largely due to an increase in remote work during the pandemic. Even though some people are heading back to the office, vacancy in these spaces continued to increase, reaching 16.4% from 13% in 2021. What's more, 70% of survey respondents said their companies are moving into smaller offices.

Vacancy in industrial properties, however, declined to 4.9%.

2022 promises more growth
This year may continue to be rocky for the commercial real estate market, with industrial and land investments pulling their weight. Specifically, businesses predict a 5% increase in land sales, a 3% increase in industrial warehouse sales, and a 1% increase in sales of certain types of apartments.

By 2022, however, commercial real estate activity is expected to recover across all categories as more businesses reopen, travel resumes, and people return to the office. Still, sales for land and industrial properties are expected to lead this recovery process, proving their value as part of the commercial real estate market.

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Other News
REAL ESTATE INVESTMENT

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Taconic Capital Advisors | May 23, 2022

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INVESTMENTS

Woodstock Development Acquires 100% Ownership of One Bay Plaza in Burlingame, California

Woodstock Development | January 28, 2022

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REAL ESTATE INVESTMENT

HomeServices of America Acquires Ownership Stake in Title Resources Group

Title Resources Group | May 04, 2022

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BUYING/SELLING

Bonaventure Sells Luxury Multifamily Community in Williamsburg, Virginia for $100 Million

Bonaventure | June 27, 2022

Bonaventure, an integrated alternative asset manager focused on the development, construction, and property management of innovative lifestyle multifamily communities in the Mid-Atlantic and Southeastern regions, today announced the sale of a 289-unit garden-style multifamily property Williamsburg, Virginia, to Illinois-based The Inland Real Estate Group. We are very pleased with the outcome of this transaction. The price we were able to command reflects the asset’s high quality and the strong investor appetite for stabilized multifamily communities in markets with solid employment fundamentals. We take great pride in our proven ability to create meaningful value for our residents and investors.” Dwight Dunton, founder and CEO of Bonaventure The property is extremely well located at 401 Bulifants Blvd. and features a diverse collection of two- and three-bedroom floor plans with in-unit washers and dryers and private balconies or patios. The luxury community’s many amenities include a swimming pool, a fitness center, a business center, a clubhouse and a dog park. The property benefits from its proximity to Sentara Williamsburg Regional Medical Center and the shops and restaurants near Route 199 and Interstate 64. As one of the nation’s largest and most active developers and owners of multifamily communities, Bonaventure has established a track record of delivering exceptionally well-designed and highly amenitized properties that residents want to live in and investors want to own. This strategic disposition further demonstrates how Bonaventure’s vertically-integrated platform is capable of generating compelling risk-adjusted returns for its investors. Drew White, Senior Managing Director of Berkadia D.C. Metro, and Carter Wood, Senior Director of Berkadia Norfolk, facilitated the sale of the community on behalf of Bonaventure. About Bonaventure Headquartered in Alexandria, Virginia Bonaventure is an integrated alternative asset management firm specializing in multifamily design, development, construction, investment and property management. Bonaventure has over $1.5 billion of assets under management, is an expert at utilizing low-cost financing, and manages over 6,000 apartment units across 31 communities primarily in the Mid-Atlantic and Southeastern regions. Since its founding in 1999 by Dwight Dunton, with the intent to create best-in-class capabilities connecting capital to assets, the focus of the firm has been to generate excess returns on a risk adjusted basis while building enduring value through ingenuity.

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Spotlight

The answer can vary wildly depending on where you’re working, how many hours a week and with whom. We’ve created an infographic to explain some of the variables below. Whether you’re an agent.

Resources