Pandemic Rent Growth Highlights Migration Patterns

Photo by Tobias Wilden on Unsplash

When the COVID-19 pandemic hit the U.S. in the spring of 2020, few could have imagined that the virus would still be impacting daily lives for the rest of the year, let alone nearly two years later. And when lockdowns started and 20-plus million jobs were lost, the dominant theme in the multifamily market was how to mitigate the damage.

However, as we start 2022, multifamily rents are coming off record-breaking highs in 2021 with an optimistic outlook for the year ahead. Between March 2020 and December 2021, asking rents in Matrix’s top 30 metros rose by an average of $194, or 13.5 percent. During that period, asking rents increased by 20 percent or more in nine of the 30 largest metros and 10 percent or more in 19 of the top 30. Meanwhile, in only four metros—large coastal centers San Jose, San Francisco, and New York, as well as Midland, Texas—were asking rents below pre-pandemic levels.

Looking at the universe of 147 metros tracked by Yardi Matrix, asking rents increased by 20 percent or more in just over one in five (29) and by 10 percent or more in almost three quarters (79). The only metros that remain below pre-pandemic asking rent levels are in the Bay Area (San Francisco and San Jose), New York City, and Midland/Odessa, Texas, where rents are down by 22.5 percent.

Migration Shifts

The changes in rent since the pandemic started reveal much about demand and where growth could be concentrated going forward. Sheltering in place and working from home has loosened the link between home and work and limited the cultural advantages of large cities. That led to a migration from high-cost coastal centers starting in the spring of 2020. Where households are going can be seen by rent growth data.

The top choice is the South and Southwest. Between March 2020 and December 2021, asking rents grew by 34.5 percent on the Southwest Florida Coast; 31.1 percent in Phoenix; 28.5 percent in Tampa; 28.2 percent in Las Vegas; 27.2 percent in Boise, Idaho; 25.0 percent in Asheville, N.C.; 22.9 percent in Atlanta; 21.4 percent in Orlando; 20.7 percent in Raleigh-Durham; and 20.6 percent in Charlotte. These secondary and tertiary markets feature a lower cost of living than gateway metros, attractive weather, and geography, and a growing base of jobs as corporations expand there.

Another type of migration occurred between expensive coastal markets and nearby secondary markets that are less expensive. Asking rents since the pandemic started grew by 25.4 percent in the Inland Empire, 20.2 percent in Sacramento, and 18.3 percent in Orange County. In this type of migration, people move farther from job centers but within occasional commuting distance for flexible jobs. Or they are willing to make longer commutes in exchange for larger or less expensive apartments. Other metros that reflect this type of migration include Baltimore (11.7 percent), Colorado Springs (14.7 percent), Northern New Jersey (8.9 percent), and Long Island (8.6 percent).

Data and chart courtesy of Yardi Matrix

The struggles of San Jose (-4.8 percent), San Francisco (-2.1 percent), and New York (-0.1 percent) reflect the high cost of housing in those markets and decline of office usage, especially among the technology jobs in the Bay Area metros. Some renters have become either unable or unwilling to pay high rents for small apartments in urban areas.

Even so, gateway cities can take heart from the fact that demand is rapidly returning. Year-over-year through November, occupancy of stabilized apartments is up 3.2 percent in New York, 2.9 percent in Chicago, 2.5 percent in San Jose, and 2.0 percent in San Francisco. As the pandemic gets nearer to its end phase, more companies are asking employees to come back to the office, if not full time at least more often. What’s more, as cities reopen, young workers from other parts of the country want to experience the cultural and lifestyle benefits of gateway centers.

An Enduring Trend?

Where all this goes is unpredictable. As demonstrated by the onset of the Omicron wave, forecasting the end of the pandemic is difficult. New variants of the virus may impact corporate policies regarding remote work—more are delaying going back to the office or even implementing permanent fully remote policies. That could continue to drive migration away from large job centers. In-migration continues to be a big factor. Fewer people moved to urban centers during the pandemic, even as more moved out. Post-pandemic, immigration could pick up and make up for households moving out. As long as the pandemic continues to affect commerce and travel, future migration will remain unpredictable. Clearly, however, the growth in metros in the South and West is not likely to abate.

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Source: Pandemic Rent Growth Highlights Migration Patterns

https://www.creconsult.net/market-trends/pandemic-rent-growth-highlights-migration-patterns/

Demand for Apartments in 2021 Smashes Previous Record High by 66%

Demand for market-rate apartments in 2021 soared far above the highest levels on record in the three decades RealPage has tracked the market. Net demand totaled more than 673,000 units – obliterating the previous high set in 2000 by a remarkable 66%. Demand would have been even stronger if not for record-low vacancy, severely limiting the number of units available to rent.

Strong demand drove up apartment occupancy 2.1 basis points year-over-year to 97.5%. Both the increase and the resulting rate were the highest on record since RealPage began tracking apartments in the early 1990s.

Household formation is likely occurring at a faster clip than official government data sources are reporting. It’s not just apartments. We’re seeing huge demand and ultra-low availability for all types of housing – including for-sale homes and single-family rentals – in essentially every city and at every price point.

The Sun Belt and Mountain/Desert regions combined to account for more than half of the nation’s apartment demand in 2021, led by Dallas/Fort Worth’s 7.4% share of the U.S. total.

Remarkably, occupancy rates hit or top 96% in 148 of the nation’s 150 largest metro areas. (For context, a rate of 95-96% is traditionally considered “full” when accounting for normal turnover time between leases.) The only exceptions are a pair of small Texas markets: Corpus Christi and Midland/Odessa.

Severely limited availability has led to price appreciation in all types of housing, including apartments. Effective asking rents on new leases increased a record-high 14.4% in 2021. However, there are signs that rent growth could soon moderate – though not dramatically. True new lease rent growth (the replacement rent a new renter pays compared to the previous renter of the same unit) peaked in August and has inched down since then. Asking rents, the traditional headline metric, tend to be a lagging indicator.

New lease rent growth in 2021 reached double-digits in 103 of the nation’s 150 largest metros. Florida and Desert region markets led the way, with appreciation topping 20% in 11 Florida markets: Naples, Sarasota, West Palm Beach, Fort Myers, Tampa, Fort Lauderdale, Port St. Lucie, Orlando, Jacksonville, Palm Bay, and Miami. Outside the Sunshine State, 11 more metros topped 20% – including Phoenix, Las Vegas, Austin, Raleigh/Durham, Atlanta, and Salt Lake City.

In one major positive sign, renter incomes continued to soar upward – keeping rent-to-income ratios in the low 20% for the average renter household signing a new lease. New renter incomes registered at $70,116 nationally, up 11% above the pre-pandemic high.

It’s tremendously encouraging to see that for the vast majority of market-rate renters, apartments remain affordable. With this big wave of new demand coming in, these renters are bringing big incomes and they are paying rent on time. We’ve seen this not only in our own data but in reporting from all the publicly traded rental housing REITs. However, averages and medians do not tell the full story. Not every household could afford market-rate rentals even prior to the pandemic, and as much as we need more housing of all types, our country remains in desperate need of more affordable housing.

One encouraging sign: Unlike in single-family, multifamily new supply continues to hit the market in large volumes – and even more is on the way. Nearly 360,000 market-rate apartment units completed in 2021. That’s the biggest addition in more than three decades. Another 682,000 units are under construction. Of those, roughly 426,000 are scheduled to complete in 2022 – marking the first time since 1987 supply will top the 400,000-unit mark.

The increase in supply is great news for renters unable to find available housing. We need more housing – all types of housing. But most of these new apartments are higher-rent, Class A+ communities. Affordable housing requires government support and funding in various forms, and there simply isn’t enough of that across most of the country right now.

Construction leaders remain the usual markets, led by Dallas/Fort Worth, Phoenix, and New York. On a relative basis (construction relative to the size of the market), metros seeing significant volumes of supply underway include Nashville, Austin, Salt Lake City, Phoenix, Charlotte, Raleigh/Durham, and Jacksonville – all high-demand areas.

“Multifamily starts have been robust over the last decade and stalled only briefly when the pandemic first hit before re-accelerating again,” said Carl Whitaker, RealPage’s Director of Research and Analysis. “Starts in 2022 will likely top 2021 levels, meaning completions should remain very high through at least 2023-2024. That’s especially true in many of the nation’s Sun Belt metros, most notably D/FW, Austin, Phoenix, and Nashville.”

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Source: Demand for Apartments in 2021 Smashes Previous Record High by 66%

https://www.creconsult.net/market-trends/demand-for-apartments-in-2021-smashes-previous-record-high-by-66/

Prediction 2022 will be a good year for multifamily housing

 

In its U.S. Multifamily Outlook for Winter 2022, Yardi Matrix forecasts that the fundamentals of the multifamily housing business will remain strong in 2022 as the wider economy continues its recovery.

 

Yardi Matrix cited a forecast that called for economic growth of nearly 4 percent in 2022, down from 6 percent in 2021. This is somewhat higher growth than that called for in the recent forecast from Fannie Mae.

One risk to growth is seen to be the rate at which total employment is returning to its pre-pandemic level. Recent reports indicate that there are millions fewer people currently employed than before the pandemic. In addition, the labor force participation rate remains well below its pre-pandemic level, leaving many unfilled jobs in the economy. The shortage of construction workers in particular may impact plans to grow the supply of multifamily housing in 2022.

The rise of inflation and its persistence are also threats to the economy. The fear is that the Federal Reserve will take steps in response to the growth of inflation, such as raising interest rates, that will choke off growth in the economy. While this scenario could lead to a recession, Yardi Matrix believes that a recession is not likely to occur until after 2023.

The year 2021 was one for the record books for the business of multifamily housing. Asking rents were up 13.5 percent and Yardi Matrix estimates that absorption exceeded 400,000 units. However, this is well below the absorption rate of 670,000 units in 2021 estimated by RealPage. The nationwide occupancy rate reached 96 percent in late 2021.

For 2022, Yardi Matrix expects the rate of rent growth to fall to 4.8 percent. While this is down significantly from the level in 2021, it is nearly double the long-term average. Rent growth in 2022 is expected to be supported by continued recovery in the jobs market and by the rapid rise in housing prices and interest rates pricing some renters out of homeownership. Yardi Matrix reported that more than 350,000 units of multifamily housing were delivered in 2021. They expect deliveries to grow to 380,000 units in 2022, representing 2.5 percent of existing inventory. Currently, 800,000 units are under construction, a level that Yardi Matrix expects to be sustained through 2022.

Sales of multifamily buildings rose to $166.8 billion in 2021, up 30 percent from the previous high recorded in 2019. Per-unit prices also set a new high at $188,000 per unit. This was up 20 percent from the level in 2020.

Funding for multifamily mortgages remains readily available. The allocations for Fannie Mae and Freddie Mac were both raised this year by $8 billion to a level of $78 billion each. Funding from commercial mortgage-backed securities (CMBS) and collateralized loan obligations (CLO) also rose in 2021 and are expected to remain high in 2022. While not giving specific forecasts for 2022, Yardi Matrix noted that cap rates for multifamily housing have fallen to the 5 percent range. In certain markets, cap rates for class A properties may be below 4 percent.

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Source: Prediction: 2022 will be a good year for multifamily housing

https://www.creconsult.net/market-trends/prediction-2022-will-be-a-good-year-for-multifamily-housing/

CRE Multifamily Mortgage Delinquency Rates Fell In Q4

 

CRE, Multifamily Mortgage Delinquency Rates Fell In Q4

Delinquency rates for mortgages backed by commercial and multifamily properties declined during the fourth quarter of 2021, according to the new Mortgage Bankers Association’s latest CREF Loan Performance Survey.

“The share of outstanding balances that are delinquent fell for both lodging and retail properties, as property owners and lenders and servicers continue to work through troubled deals. The share of loan balances becoming newly delinquent was the lowest since the onset of the pandemic,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research in the announcement of the results.

He noted it is encouraging that particularly there was improvement among property types that were the most impacted by the downturn.

The improvements in the delinquency rates were small as 97.0% of outstanding loan balances for commercial and multifamily mortgages were current at the end of the fourth quarter, up from 96.7% at the end of the third quarter of 2021 while 1.9% were 90+ days delinquent or in REO, down from 2.2% three months earlier and 0.2% were 60-90 days delinquent, unchanged from three months earlier.

The sectors in the survey which have seen the biggest stress, lodging, and retail properties, saw improvements during the period along with commercial and multifamily mortgages, as a whole. MBA reported 10.5% of the balance of lodging loans were delinquent by the conclusion of December, down from 14.0% at the end of the third quarter of 2021 as the end of the fourth quarter saw 7.6% of the balance of retail loan balances were delinquent, down from 8.2% three months earlier. CMBS loan delinquency rates are higher than other capital sources because of the concentration of hotel and retail loans, but they saw improvement during the final three months of 2021 as well.   Source: CRE Multifamily Mortgage Delinquency Rates Fell In Q4

https://www.creconsult.net/market-trends/cre-multifamily-mortgage-delinquency-rates-fell-in-q4/

Multifamily Market Polarized by Renter Incomes

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The pandemic’s second year witnessed a robust rebound in rental housing demand, which reduced vacancies and propelled rents higher. Lack of for-sale inventory kept many higher-income renters in their apartments, while the same lower-income folks who suffered the greatest COVID-related job losses were also most rent-burdened. That sober reality has heightened the need for a fully-funded housing safety net, which must take into account safeguarding existing housing from climate change threats.

These were among the issues discussed during the “America’s Rental Housing 2022” webinar, a Joint Center for Housing Studies of Harvard University panel discussion moderated by Vox policy reporter Jerusalem Demsas.

Expert panel

Offering their perspectives were panelists Peggy Bailey, senior advisor on rental assistance, Office of the Secretary for the U.S. Department of Housing and Urban Development; Calvin Gladney, president & CEO of Smart Growth America; Chris Herbert, managing director of the Harvard Joint Center for Housing Studies; and Kara McShane, managing director, commercial real estate for Wells Fargo.

Necessary policy considerations were top of mind for Bailey, who emphasized setting in place intentional policies that at the least subsidize rent and create the right incentives to develop affordable housing along with higher-end rental units. “We can internally look at things like the affordable housing assistance we currently employ,” she said. “We must look at how do we align our programs at HUD to get those pieces of the affordable housing capital stack working better, ensuring it’s easier to create affordable housing.”

Asked what banks can do to address the lack of affordable housing, McShane noted the affordable crisis is one of supply.

“So whatever we can do as a bank to increase supply and preserve the housing stock we have is what we need to do,” said McShane. “We need a solution from both government policy and the private sector . . . We need to partner together in the private sector, not just big banks but big tech, to create and preserve housing.”

Climate change

Keeping renters in their homes given the increased threat of climate change is a matter, Gladney opined, of the need to “stop doing dumb things.”

Continuing to build in flood-prone zones and in places where it’s recognized homes may burn to the ground are among those ill-advised moves, he added. “We allow things to happen in the market to put renters in harm’s way, and we need to stop doing that.”

Noting the difficulty of building multifamily housing in many places, especially in suburban areas, Herbert said states must take bigger roles in mandating zoning for denser housing within communities. “We can also lean into how we can build housing that’s more affordable,” he added. “Design professionals must be brought into how housing can be designed to make more efficient use of space.”

Another way to overcome resistance to denser development is to design multifamily housing that looks more like single-family housing, Gladney said.

Putting the capstone on the discussion, McShane stressed the need for partnership and collaboration. “One company or organization is not going to get it done,” she noted. “We all need to come together and keep people in homes they can be proud of.”

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Source: Multifamily Market Polarized by Renter Incomes

https://www.creconsult.net/market-trends/multifamily-market-polarized-by-renter-incomes/

Chicago apartment market shows no signs of cooling off

 

The new report, released yesterday, shows that Chicago apartment rents had by the end of January increased by 15.6 percent when compared to the same month a year earlier.

Apartment List reports that the median rent for a one-bedroom apartment in Chicago stood at $1,265 at the end of January. That median figure rises to $1,395 for a two-bedroom apartment in the city.

For the entire state, median apartment rents have jumped 14.2 percent on a year-over-year basis. For the entire country, that year-over-year increase is 17.8 percent.

Not all areas of Chicago, of course, are seeing rents rise at the same rate. Apartment List reports that median apartment rents in the suburb of Lombard were down 0.9 percent on a year-over-year basis. The median rent for two-bedroom apartments in that suburb is $1,919, while one-bedroom units have a median rent of $1,438. Naperville has the most expensive rents among larger cities in the Chicago area. Apartment List reports that the median rent for a two-bedroom apartment in Naperville now stands at $2,033.

And the cheapest apartment rents in the Chicago area? You’ll find those in Waukegan. According to Apartment List, the median rent for a two-bedroom apartment in that suburb is now $1,212.

While renting an apartment in Chicago isn’t cheap, units are less expensive here than in many other comparable cities. San Francisco, for instance, has a median two-bedroom rent of $2,681, more than one-and-a-half the median two-bedroom rent in Chicago.

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Source: Chicago apartment market shows no signs of cooling off

https://www.creconsult.net/market-trends/chicago-apartment-market-shows-no-signs-of-cooling-off/

Q1 State of CRE & Industry Outlook

Summary

Tune in on Wednesday, Feb 23 at 2 pm EST for a conversation about the current state of US commercial real estate markets and a look at key investment trends.

 

Experts from NYU Schack Institute of Real Estate, the Federal Reserve Bank of Atlanta, and CBRE will discuss recent macroeconomic and market data and the recovery outlook for multifamily, industrial, office, and retail properties as the 2022 kick-off. 

 

You'll learn about:

• How last quarter's macroeconomic, public, and private market data will impact your business
• Industry outlook for 2022 
• Economic recovery implications across property types and markets
• Data-backed areas of opportunity and risk for your business 
•  

REGISTER

Speakers

Brian Bailey Subject Matter Expert, CRE Federal Reserve Bank of Atlanta

Bryan Doyle Managing Director, Capital Markets CBRE

Timothy Savage Professor NYU Schack Institute of Real Estate

Richard Kalvoda Senior EVP Altus Group

https://www.creconsult.net/market-trends/q1-state-of-cre-industry-outlook/

Rates Jump to New 2-Year Highs After Fed Announcement

 

Fed policy is critically important to interest rates and January has marked a shift in the Fed policy outlook.  In not so many words, the Fed sees itself hiking rates and decreasing its bond purchased more quickly than previously expected.  It has conveyed this in various ways since the beginning of the month.  Today's policy announcement and press conference were just the latest iterations.  They were also arguably the least equivocal.

Despite the relatively clear communication from the Fed in recent weeks, financial markets were increasingly laboring under the misapprehension that the Fed would take a softer tone in light of recent market drama.  In other words, stocks have dropped significantly and rates spiked to 2-year highs as the Fed began its communication push this month, so perhaps they would "communicate" in a more market-friendly way today.

While it's not uncommon for some market participants to hope for such things, it was never very likely in this case (one of the reasons I reiterated that the Fed is not tasked with babysitting the market in yesterday's commentary).  True to form, the Fed paid zero attention to recent market movement.  In their view, rates are still low, and asset prices are elevated.  If anything, they feel they need to hustle when it comes to hiking rates and decreasing bond purchases.

Bottom line, the market was a bit flat-footed heading into today's Fed events.  When the Fed stuck to the tightening script rather religiously, rates were forced to snap back to the reality they'd previously done a good job of understanding.  Case in point, Treasury yields and mortgage rates are both very close to levels seen last Monday.  Mortgage rates just happen to have edged slightly higher, thus earning the dubious distinction of "highest in 2 years."

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Source: Rates Jump to New 2-Year Highs After Fed Announcement

https://www.creconsult.net/market-trends/rates-jump-to-new-2-year-highs-after-fed-announcement/

Apartment Residents' Preferences Driven by Remote Work

 

NMHC/Grace Hill renter preference survey sheds light on how the pandemic has affected resident behavior.

Teleworking factored significantly in renter preferences, according to a survey released last week by NMHC/Grace Hill—a trend that is expected to carry into 2022 and beyond. The desire for single-family rentals also made the list.

The NMHC/Grace Hill 2022 Renter Preferences Survey Report featured input from 221,000 renters living in 4,564 communities nationwide, with data available in 79 markets.

One-quarter of all moves tracked were specific to changes in teleworking.

“Whether digital nomads looking to join a flexible membership club, pet amenities dog owners won’t rent without or the insatiable appetite for more packages, the NMHC/Grace Hill Renter Preferences Survey reveals all that has changed since 2019,” Sarah Yaussi, Vice President, Business Strategy, NMHC, said in prepared remarks. “And what we’ve seen overall are renters reporting a great desire for more space, better amenities, and in-home creature comforts.”

The survey was a topic of conversation last week during NMHC’s Annual Meeting in Orlando.

Home is Now Sanctuary

Now more than ever, home is proving to be a sanctuary, and renters have a great desire—and are willing to pay a premium in additional monthly rent—for certain amenities. Reported features with the highest share of renter interest, and their associated additional average monthly premiums, include:

• Washer/dryer in-unit (92% of renters interested / $54.73 monthly premium);
• Air conditioning (91% / $54.73);
• Soundproof walls (90% / $46.21);
• High-speed Internet access (89%; $47.93), and
• Walk-in closet (88%; $43.46).

Give Them Their Space

All the lockdowns seemingly led to a strong desire for additional space; 28% of renters who said they intend to move to a different rental community when their lease expires cited “additional living space” as a reason, up from just 19% two years ago. This was the third-most-common reason for wanting to move after “seeking lower rent” (49% of renters) and “seeking better community amenities” (29%).

When asked which types of rental homes were considered during their last home search, traditional apartment homes garnered a majority of responses (57%). However, townhomes and single-family rentals were also in the mix at 23% and 19% of responses, respectively, supporting the desire for more space and validating industry and investor eyes on these property types.

Special Delivery

While many kept venturing out to a minimum, the need for goods to be delivered increased. The share of renters who received two or fewer packages per month dropped from 45% in 2019 to just 24% this round. Conversely, the share who received three or more packages per month increased from 55% to 76% over the two-year period. And the share of renters who received perishable items several times a month or more nearly doubled from 9% in 2019 to 17%.

Market-Level Nuances

“It’s important to note that, beyond national trends, there are several market-level nuances affecting renter preferences,” said Kendall Pretzer, CEO of Grace Hill. “National data paints an overall picture for the industry, but it is vital for operators to keep a finger on the pulse of each individual market in their portfolios. Trends vary by region, by state, and by municipality, and may stray significantly from national averages. A program that regularly polls prospects and solicits resident feedback is essential to successfully meeting renter preferences and expectations.”

For example:

• A gear wall, for home storage and organization, is a sought-after home feature in Honolulu, where 45% of renters say they are interested or won’t rent without one.
• Rental dwellers in Savannah, Ga., show the least interest (11%) in a gear wall but show more interest than any other market in a makerspace/DIY room (39%).
• There is interest in hot tubs in Boulder, Colo. (70%) than in Philadelphia (41%).
• Covered parking is more important in Minneapolis (80%) than in Gainesville, Fla. (47%)

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Source: Apartment Residents’ Preferences Driven by Remote Work

https://www.creconsult.net/market-trends/apartment-residents-preferences-driven-by-remote-work/

Drilling Down Into the Hot Apartment Submarkets

Areas near Phoenix and Dallas are poised to perform well in 2022.

There are hot apartment markets such as Phoenix and Dallas projected to do well this year, but understanding the fundamentals in those areas’ key submarkets can prove even more valuable to investors and developers.

Much has been written about the scorching hot Phoenix market, for example. Greg Willett, Vice President of Marcus & Millichap’s Institutional Property Advisors (IPA) multifamily research, points more specifically to its nearby cities such as Tempe, Chandler, and Gilbert on the west side of metro Phoenix.

Development is the heaviest downtown and in West Valley suburbs such as Glendale, Ariz., according to Marcus & Millichap’s report. Net absorption surpasses 19,000 units, the highest annual total since at least 2000. Still, the record-setting wave of supply results in a slight vacancy increase to 2.8 percent.

Rent growth will settle from last year’s 21.9 percent gain but remain strong. The mean will jump to $1,630 per month in 2022, aligning with the 2016-2020 annual average growth rate.

More buyers pursue Class B and C assets Downtown and in North Phoenix. These may better align with the budgets of some renters in the area amid a wave of new modern facilities.

A Closer Look at Dallas

Likewise in the Dallas metro, Willett said nearby locations such as Frisco, Allen, and McKinney on the north side of metro Dallas were ones to watch.

Amid rapid population growth and household formation, assets in Dallas-Fort Worth are attractive to investors throughout the world, according to the report.

“The sizable field of buyers eager to acquire properties in the Metroplex is pushing up sale prices and compressing yields. From 2013 to 2020 the mean sale price increased by an average of more than 10 percent per year, a trajectory sustained in 2021.

“The average cap rate also dipped below 5 percent for the first time on record last year. Many buyers are following household formation trends to North Dallas suburbs, with deal velocity ramping up in locations beyond Interstate 635 like Carrollton, Frisco, and Garland.

“Areas that will receive the most new supply include Frisco, South Arlington-Mansfield, and Intown Dallas. Following a 190-basis-point drop in 2021, downward vacancy movement continues this year as net absorption exceeds new supply. The rate will fall to a two-plus decade low of 3.6 percent. It will be difficult to mirror the 12 percent gain from last year, but rent growth in 2022 will be the second-fastest in the past six years.”

The mean effective rate will reach $1,395 per month, Marcus & Millichap forecasted. Competition for assets in North Dallas suburbs, Downtown, and in the Mid-Cities will lead buyers to search farther out. Denton, McKinney, and Waxahachie may offer compelling prospects.

Willett added that key suburban job centers across the entire state of Florida continue to perform well.

Looking Elsewhere

“Performances lagged to some degree in most urban core settings across the country, but even the worst-performing neighborhoods generally made progress viewed relative to 2020 results,” Willett said. “By the end of 2021, the only places where rents had not fully recovered to pre-pandemic levels were in the San Francisco Bay area and select neighborhoods in metro New York.”

Marcus & Millichap this week released its full 2022 apartment market forecast, citing Orlando and Las Vegas as its best bets overall for 2022.

 

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Source: Drilling Down Into the Hot Apartment Submarkets

https://www.creconsult.net/market-trends/drilling-down-into-the-hot-apartment-submarkets/

Goldman Sachs Says Rent Increases Should Slow Down This Year

 

• The rent-price surge seen through 2021 likely peaked in the fourth quarter, Goldman Sachs said Tuesday.
• Shelter inflation gauges suggest price growth will start to slow faster by mid-2022, the bank added.
• The bank sees rent growth peaking at 5.1% in 2021 and slowing to 4.2% by the end of 2024.

Renters have been on a rollercoaster ride throughout the pandemic. That choppiness is cooling down soon, according to Goldman Sachs.

City rents have been on a tear. Prices were up 11.5% year-over-year in November, according to CoreLogic's Single-Family Rent Index, much higher than the 3.8% annual growth rate in November 2020 and marking the fastest inflation in at least 16 years. Popular pandemic moving destinations like Austin, Las Vegas, and Miami led the charge in 2021, and rents in major metro areas like New York City and San Francisco more recently roared back as people prepared to return to offices.

The surge raised concerns that the affordability crisis in the housing market could bleed into rentals. Yet early signs suggest the US is past peak rent inflation, and apartment prices should start to stabilize this year, Goldman analysts led by Jan Hatzius said in a Tuesday note.

Shelter inflation accelerated to an annualized rate of 5.1% in the fourth quarter, according to the Census Bureau. Trends in other inflation measures, however, show rent growth starting to ease through the end of last year. The Consumer Price Index's rent and owners-equivalent rent measures both decelerated in December. The gauges track prices of new and continuing leases, and it takes longer for the latter to follow price increases in the former. By modeling when the new leases saw the biggest price hikes, the economists estimate that the rent-price surge was the strongest in the fourth quarter and will fade moving forward.

The cooldown won't be quick. Shelter inflation will linger at a year-over-year pace of about 5% through the third quarter before dropping to 4.8% at the end of 2022, Goldman said. Price growth will continue to ease to 4.5% at the end of 2023 and to 4.2% at the end of the following year, the team added. The forecast offers new hope that the country's broader inflation problem will also improve. Rent growth is a "sticky" form of inflation, meaning prices are not likely to decline after soaring higher.

Persistently strong rent inflation is potentially a bigger problem for the economy than more temporary price increases for things like gasoline or food, as it could spark a new inflation crisis and the need for large-scale intervention. Goldman's outlook, then, assuages some concerns that the rent boom of 2021 would keep inflation stuck at its four-decade highs.

Still, risks exist on both sides of the bank's forecast. Rent inflation could accelerate again in 2022 if less of the bump from new-lease rents has made its way to renewals than expected, the team said. That would prolong the cycle and likely drive shelter inflation higher. Conversely, rent growth could drop even faster if most of the new-lease boost has already hit renewal inflation, the team said. Weaker underlying shelter-inflation trends could also drag on rent growth, they added.

For now, rent is still growing at its fastest rate since the financial crisis, according to BLS data. Even the weaker inflation rates forecasted by Goldman sit above the pre-pandemic trend, but after a year of skyrocketing shelter prices, the bank's projected peak offers some respite for those struggling to keep up.

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Source: Goldman Sachs Says Rent Increases Should Slow Down This Year

https://www.creconsult.net/market-trends/goldman-sachs-says-rent-increases-should-slow-down-this-year/

Goldman Sachs Says Rent Increases Should Slow Down This Year

 

• The rent-price surge seen through 2021 likely peaked in the fourth quarter, Goldman Sachs said Tuesday.
• Shelter inflation gauges suggest price growth will start to slow faster by mid-2022, the bank added.
• The bank sees rent growth peaking at 5.1% in 2021 and slowing to 4.2% by the end of 2024.

Renters have been on a rollercoaster ride throughout the pandemic. That choppiness is cooling down soon, according to Goldman Sachs.

City rents have been on a tear. Prices were up 11.5% year-over-year in November, according to CoreLogic's Single-Family Rent Index, much higher than the 3.8% annual growth rate in November 2020 and marking the fastest inflation in at least 16 years. Popular pandemic moving destinations like Austin, Las Vegas, and Miami led the charge in 2021, and rents in major metro areas like New York City and San Francisco more recently roared back as people prepared to return to offices.

The surge raised concerns that the affordability crisis in the housing market could bleed into rentals. Yet early signs suggest the US is past peak rent inflation, and apartment prices should start to stabilize this year, Goldman analysts led by Jan Hatzius said in a Tuesday note.

Shelter inflation accelerated to an annualized rate of 5.1% in the fourth quarter, according to the Census Bureau. Trends in other inflation measures, however, show rent growth starting to ease through the end of last year. The Consumer Price Index's rent and owners-equivalent rent measures both decelerated in December. The gauges track prices of new and continuing leases, and it takes longer for the latter to follow price increases in the former. By modeling when the new leases saw the biggest price hikes, the economists estimate that the rent-price surge was the strongest in the fourth quarter and will fade moving forward.

The cooldown won't be quick. Shelter inflation will linger at a year-over-year pace of about 5% through the third quarter before dropping to 4.8% at the end of 2022, Goldman said. Price growth will continue to ease to 4.5% at the end of 2023 and to 4.2% at the end of the following year, the team added. The forecast offers new hope that the country's broader inflation problem will also improve. Rent growth is a "sticky" form of inflation, meaning prices are not likely to decline after soaring higher.

Persistently strong rent inflation is potentially a bigger problem for the economy than more temporary price increases for things like gasoline or food, as it could spark a new inflation crisis and the need for large-scale intervention. Goldman's outlook, then, assuages some concerns that the rent boom of 2021 would keep inflation stuck at its four-decade highs.

Still, risks exist on both sides of the bank's forecast. Rent inflation could accelerate again in 2022 if less of the bump from new-lease rents has made its way to renewals than expected, the team said. That would prolong the cycle and likely drive shelter inflation higher. Conversely, rent growth could drop even faster if most of the new-lease boost has already hit renewal inflation, the team said. Weaker underlying shelter-inflation trends could also drag on rent growth, they added.

For now, rent is still growing at its fastest rate since the financial crisis, according to BLS data. Even the weaker inflation rates forecasted by Goldman sit above the pre-pandemic trend, but after a year of skyrocketing shelter prices, the bank's projected peak offers some respite for those struggling to keep up.

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Source: Goldman Sachs Says Rent Increases Should Slow Down This Year

https://www.creconsult.net/market-trends/goldman-sachs-says-rent-increases-should-slow-down-this-year/

State of Commercial Real Estate 2022

 

On Tuesday, Feb. 15, eXp Commercial hosted a free virtual seminar in the eXp Commercial Campus metaverse featuring founder and president of Red Shoe Economics, KC Conway as the keynote speaker. The 60-minute "State of the Commercial Real Estate Industry" seminar is open to all eXp Commercial agents and other interested parties. 

With more than three decades of experience as an economist, Conway will provide industry research, data, analytics, and economic insight on the complex and changing commercial real estate market.

 

 

 

About KC Conway:

Economist and Futurist Kiernan “KC” Conway, CCIM, CRE, MAI is the mind trust behind Red Shoe Economics, LLC, an independent economic forecasting and consulting firm furthering KC’s mission as The Red Shoe Economist by providing organic research initiatives, reporting, and insights on the impact of Economics within the commercial real estate industry.  A proud graduate of Emory University with more than 30 years experience as a lender, credit officer, appraiser, instructor, and economist; KC is recognized for accurately forecasting real estate trends and ever-changing influences on markets all across the United States. With credentials from the CCIM Institute, Counselors of Real Estate, and the Appraisal Institute, KC currently serves as Chief Economist of the CCIM Institute and as an Independent Director for Monmouth REIT MNR. A gifted and prolific speaker KC has made more than 850 presentations to industry, regulatory and academic organizations in the last decade, and has been published in many national and regional newspapers and journals with frequent contributions to radio and television programming.

 

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https://www.creconsult.net/market-trends/state-of-commercial-real-estate-2022/

Illinois RE Journal Forecast Chicago 20th Anniversary Conference

 

Marcus & Millichap is proud to be a Gold Sponsor of the Forecast Chicago 20th Anniversary Conference presented by Illinois Real Estate Journal in Rosemont, IL on January 6, 2022. Steven D. Weinstock, FVP/National Director, Self-Storage Division and Regional Manager of the Chicago Oak Brook office, is a panelist on the Investment Breakout Session at 11:00 a.m. CT. Joe Powers, Regional Manager of the Chicago Downtown office, is a panelist on the concurrent Multifamily Breakout Session, also at 11:00 a.m. CT. Join the Marcus & Millichap team at this event and learn how our 50 years of experience can help you reach your investment goals.

 

REGISTER

 

https://www.creconsult.net/market-trends/illinois-re-journal-forecast-chicago-20th-anniversary-conference/

Multifamily Forum Southeast

 

The Marcus & Millichap / IPA Multifamily Forum Southeast brings together the most active multifamily developers, investors, owners, and operators in the region to create a marketplace for learning, discovery, networking, and deal-making. The event will be held on Thursday, March 31, 2022, at the Loudermilk Convention Center in Atlanta, GA. Meet with our multifamily and financial advisors and discover how our unique combination of expertise and experience can help you achieve your investment goals.

 

REGISTER

 

https://www.creconsult.net/market-trends/multifamily-forum-southeast/

State of Commercial Real Estate 2022

 

On Tuesday, Feb. 15, eXp Commercial hosted a free virtual seminar in the eXp Commercial Campus metaverse featuring founder and president of Red Shoe Economics, KC Conway as the keynote speaker. The 60-minute "State of the Commercial Real Estate Industry" seminar is open to all eXp Commercial agents and other interested parties. 

With more than three decades of experience as an economist, Conway will provide industry research, data, analytics, and economic insight on the complex and changing commercial real estate market.

 

 

About KC Conway:

Economist and Futurist Kiernan “KC” Conway, CCIM, CRE, MAI is the mind trust behind Red Shoe Economics, LLC, an independent economic forecasting and consulting firm furthering KC’s mission as The Red Shoe Economist by providing organic research initiatives, reporting, and insights on the impact of Economics within the commercial real estate industry.  A proud graduate of Emory University with more than 30 years experience as a lender, credit officer, appraiser, instructor, and economist; KC is recognized for accurately forecasting real estate trends and ever-changing influences on markets all across the United States. With credentials from the CCIM Institute, Counselors of Real Estate, and the Appraisal Institute, KC currently serves as Chief Economist of the CCIM Institute and as an Independent Director for Monmouth REIT MNR. A gifted and prolific speaker KC has made more than 850 presentations to industry, regulatory and academic organizations in the last decade, and has been published in many national and regional newspapers and journals with frequent contributions to radio and television programming.

 

how Can We Help You?

Are you looking to Buy, Sell or Finance Multifamily Property?

contact us

https://www.creconsult.net/market-trends/state-of-commercial-real-estate-2022/

CNBC Features Marcus & Millichap CEO Hessam Nadji Commercial Real Estate Gathers Momentum

 

CNBC Features Marcus & Millichap CEO Hessam Nadji

 

Commercial Real Estate Gathers Momentum; Performance Gap Widens by Property Type

 

Why Broad-based Recovery Should Continue in 2022

Latest Perspective on the Office Sector, Suburban vs. Urban Outlook

Potential Risks and Headwinds

 

 

 

 

https://www.creconsult.net/market-trends/cnbc-features-marcus-millichap-ceo-hessam-nadji-commercial-real-estate-gathers-momentum/

Why Aren't There Any Vacant Apartments?

 

Apartment occupancy in the U.S. has hit an all-time high, meaning anyone looking for a new place is going to have a rough time of it.

Fully 97.5% of professionally managed apartment units are spoken for as of December, the highest figure on record, according to data from the property management software company RealPage. That’s more than 2 percentage points higher than the occupancy rate in December 2020, a difference that represents hundreds of thousands of households.

“I don’t think most people realize just how crazy that is,” says Jay Parsons, deputy chief economist for RealPage. “Not only is that a record, typically we consider 95 to 96% to be essentially full.”

But for most tenants, there may be a silver lining to the lack of options. Rents for available apartments have seen record increases over the last year, yet the occupancy rates suggest that most renters aren’t paying those prices.

High occupancy rates leave little margin for renters who need to relocate for jobs, education or other reasons. Winter is the shoulder season when it comes to these moves: Families typically settle in for the cold, the holidays, and the school year, then upend their lives over the summer. (The same seasonal pattern applies to forced exits through evictions.) In 2021, however, the occupancy rate rose steadily throughout the year, without the typical seasonal variation — another quirk of the pandemic.

Such low vacancy levels reflect a historically high number of renters renewing their leases. The lack of churn means that people hunting for new homes have fewer options. Apartments may be put on the market and leased before tenants leave the unit: “Clean, prep, paint, change the carpet, and get the next person in,” Parsons says.

Abnormal is the pandemic normal, of course. Rents for market-rate apartments cratered during the first year of the pandemic as some residents decamped from cities (and, more importantly, new renters didn’t move in to replace them). Rents fell furthest in high-cost cities but also dipped in the suburbs of New York, Los Angeles, San Francisco, and a few other places. This plunge led building owners to offer huge discounts and concessions to try to lure renters — followed by steep double-digit rent hikes in 2021 as tenants finally returned to those buildings.

It’s not just the large apartment buildings in major metros that are experiencing big swings in rental trends. Rental homes and apartments across the U.S. are witnessing the lowest vacancy rates in nearly 40 years. People just aren’t moving: Despite the scramble in spring 2020 following the arrival of the pandemic and the countless stories of Covid-fueled migration patterns, a record low number of households moved between March 2020 and March 2021, according to a report by the

Pew Research Center

.

For tenants who already signed a lease or never left in the first place, spikes in rent listings might not affect them much. Landlords face a loss on paper when it comes to filling units, known in the industry as loss to lease. This is the difference between the advertised rent and what renters actually pay. An apartment building owner in Dallas might list a vacant unit at $200 higher than what the renter down the hall is paying. Property owners want to narrow this gap, and in a tight market, they have more leverage. Yet that same Dallas landlord marking up vacant units might not want to risk maxing out a current tenant’s rent when their lease comes due. It’s easier and more cost-efficient to keep them in place paying a less-than-maximum rent than to search for a new tenant. Very few apartment operators are going to move a household up to full price, Parsons says. Keeping a paying tenant in place is a high priority, especially after the chaos of the last two years.“When you send a renewal notice, 90 days out, there’s a lot of uncertainty. Especially in the Covid era, so much could change,” Parsons says. “There’s a real risk that we could have another economic challenge. There’s a balance of a higher chance of collecting revenue in an occupied unit versus a chance of zero revenue. Do you want to roll the dice?”

Rents are rising, and the discounts and concessions of 2020 are likely a thing of the past. Moreover, demand for housing continues to outpace the supply. In this specific moment, with omicron surging and rental chaos a recent memory, many landlords will stick with their current tenants. No matter: The housing shortage is so severe that property owners likely don’t need to charge max rents to make a bundle.

End Google Tag Manager

Families that do need to move right now face tough choices — or rather, fewer choices.

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Source: Why Aren’t There Any Vacant Apartments?

https://www.creconsult.net/market-trends/why-arent-there-any-vacant-apartments/

Inflation: Why prices will keep soaring in 2022

 

Prices have climbed so high it will take some time for them to come back down to earth. In other words, the uncomfortable inflation numbers of 2021 will likely stay with us well into the New Year.

The most recent price data we have is from November when two of the most-watched inflation measures — the consumer price index and the personal consumption expenditure index — each climbed to a 39-year high.

The latter index is what the Federal Reserve pays the most attention to when assessing the nation's inflation.

There's some room for optimism: The central bank, which is tasked with keeping prices stable, is rolling back its pandemic stimulus and is expected to raise interest rates next year to tame inflation and stop the economy from overheating.

And last month's data actually showed that prices increased at a slower rate in November than in October for both the

CPI

and the PCE indices. That's good news, even though the slowdown was small at only 0.1 percentage points.

But here's the thing: Economists prefer to look at price movements over a period of time, usually 12 months. So a small slowdown like November's won't move the needle just yet.

In fact, it might take months for these incremental slowdowns to show up in the data. After a year of prices soaring on high demand and supply chain chaos, a lot of big numbers are baked into the 12-month data set. Even if inflation suddenly falls off a cliff, it would take time for the leading indices to reflect that. This is what Fed Chair Jerome Powell is talking about when he mentions "base effects."

Why will inflation remain high?

Several factors are keeping prices elevated. One is the supply chain chaos that came to a head last summer. Even though some bottlenecks have eased, the issues are not fully resolved. And as long as it's more expensive — and takes more time — to move goods around the world, higher transport costs will likely be passed down to consumers.

Another big contributor is the high cost of commodity prices, leading to surging energy and food costs. Prices in both sectors have soared this year and added a good chunk to the inflation we have already seen. In the case of food, high prices have forced some consumers to buy less or switch stores.

Economists don't expect that to get any better next year. Aside from high demand and shipping costs, rising prices for fertilizer and continued bad weather could keep food prices high even as other pandemic fueled inflation pressures ease.

Rising rents also remain a concern. This is important because housing represents a big percentage of what people spend money on. If rents eat up a bigger piece of the pie, consumers might wind up spending less, which would be bad news for the recovery.

In November, rent rose 0.4% for the third month in a row, according to economists at Bank of America, and that points to higher and more persistent inflation going forward.

The "recent broadening of inflationary pressure has coincided with a notable pickup in rental inflation," said Peter B. McCrory, economist at JPMorgan, "which jumped to its highest monthly rate in 20 years in the September CPI report and has stayed firm since then."

And then there's Omicron.

Several countries, including the United States, have seen record-high Covid-19 infections in recent weeks because of the rapidly spreading variant. If this leads to a new round of lockdowns, it could once again change the way consumers spend and boost demand for stay-at-home goods.

Perhaps more importantly, Omicron could impact energy prices: If restrictions return and people travel less, the lowered energy demand would mean prices ease, and that would help bring inflation back down.

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Source: Inflation: Why prices will keep soaring in 2022

https://www.creconsult.net/market-trends/inflation-why-prices-will-keep-soaring-in-2022/

Sticker Shock Coming for Renters Receiving Concessions

Fannie Mae forecasted that concessions will decline throughout 2022, returning to more normalized levels by the end of the year.

The multifamily sector has experienced the effects of an increase in pent-up demand this past year, resulting in higher-than-average asking rents as well as concessions, depending on the type of apartment and its location.

Class A concessions peaked in March at 9.9% and have been falling since, but they remain elevated at 9.2% as of October due to competing new supply entering many local submarkets.

Those renters who have received concessions might find their benefits fleeting in 2022 though. Discounted rent from the concessions is only good for a short period of time (typically anywhere from the first month or so of free rent to discounted rent over the period of the lease).

So, this suggests that there might be a form of “sticker shock” at the end of the lease term for many tenants. That is when the new rent increase will be based on the full amount of the rent, prior to the discount resulting from the concession, according to a report from Fannie Mae, supplemented by data from RealPage.

Renewals Likely Absent of More Concessions

It may be that some tenants are expecting another round of concessions to offset that increase, but whether that materializes remains to be seen. Although the national concession rate remains elevated, fewer units are offering concessions.

That trend is expected to continue over the coming months. And as seen in the case of Class C units—the most affordable units in a location—the declining trend in concessions offered has recently started accelerating, most likely due to the improving economy and increased job growth.

As a result, Fannie Mae expects that concessions will continue decreasing, particularly for Class B and C units. It expects that the trend trajectory for Class A units will lag slightly behind, as new supply delivers over the next several quarters.

“But with the economy expected to continue and rental housing demand remaining firmly in place, we believe that concessions will decline throughout 2022, returning to more normalized levels by the end of the year,” according to Fannie Mae’s report.

Classes B and C Not Immune to Discounts

Class B concessions ended 2019 at 5.5% but recently peaked at 8.1% during the summer of 2021.

Class C began 2020 at 5.4%, and while it surpassed Class B during the earlier part of 2021, it has now begun to trend downward, to 6.6% as of October 2021.

Typically, when Class A demand softens, some tenants use the opportunity to rent more expensive units with better amenities, given that rents for these higher-quality units are now within their reach. However, the reverse happens infrequently: Tenants tend to not move back into lower quality units when those rents fall.

So, as Class A rents declined and concessions rose, a similar trend occurred with Class B and C units. And now that Class B and C concession rates are trending downward, that suggests that demand is increasing, likely keeping asking rent levels elevated.

Concessions Higher in Expensive Markets 

Although approximately 430,000 new apartment units may be completed in 2021, these units are not evenly distributed on a national basis. As has been the case for the past several years, much of the new apartment supply is concentrated in specific submarkets in approximately 12 metropolitan areas.

For instance, while Dallas, Orlando, Phoenix, and Houston all have a lot of new supply underway, their concession rates remain lower than those in the more expensive metros of New York, San Francisco, Miami, Boston, and Washington, D.C.—all of which have much higher asking rent levels, thus necessitating higher concession rates.

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Source: Sticker Shock Coming for Renters Receiving Concessions

https://www.creconsult.net/market-trends/sticker-shock-coming-for-renters-receiving-concessions/

Expect still more uncertainty in commercial real estate this year

PHOTO BY DEBBY HUDSON ON UNSPLASH

While it’s true that real estate is generally one of the most reliable markets for investment, it’s also a fact that the industry runs on cycles. The COVID-19 pandemic accelerated and even upended many of those cycles. Even now, nearly two years after it took hold in the United States, the pandemic continues to have a see-saw effect on markets.

Consider the industrial sector’s upward trajectory in relation to retail’s brick-and-mortar downturn. This inverse relationship resulted from the accelerated adoption of e-commerce, which was accelerated by the pandemic. The commercial office market has taken a hit in urban centers, but suburban office leases are on an upward swing. Hospitality is beginning to come back to life after a prolonged slowdown. But now the industry is reeling from a labor shortage.

The pandemic is not the only factor that is driving rapid change, of course. Multifamily housing continues to surge, thanks in part to a lack of single-family housing stock. The cost of living and discontent are also prompting people to rethink where they live and work. Population shifts are disrupting long-standing real estate investment strategies across geographical boundaries.

In short, 2021 was a year of flux, and 2022 looks to promise more of the same. So how can investors, developers, owners, and buyers prepare? Here are the trends to watch in the coming year:

A return to the ‘burbs: Generous work-from-home policies, cost-of-living considerations, and social unrest are fueling a shift from urban centers to the suburbs. Likewise, the success of remote-work arrangements has many commercial office occupiers rethinking just how much space they really need – and where it’s located. For now, suburban rings and smaller cities are the best bet for stability and investment opportunity.

The great migration: The migration of people isn’t limited to the urban/suburban divide. People are also moving away from the coasts and across state lines in search of lower-tax communities where their dollars will go farther. This movement will have far-reaching implications across all real-estate sectors, from housing to industrial to hospitality.

Housing demand: A lack of housing stock, soaring housing prices and the movement away from the urban core means multifamily housing should remain strong in 2022, particularly in suburban and rural communities. However, a buyer’s market may be around the corner. As housing inventory increases, prices should come down and the demand for multifamily housing may likely level off over time. Expect to see a shift occur in late 2022 or early 2023.

Evolving consumer behaviors: Even as people talk about a return to pre-pandemic normal, some things may never be the same – including retail shopping. E-commerce adoption by U.S. households skyrocketed during the early months of the pandemic. Now consumers have become accustomed to the convenience of on-demand delivery. It’s no surprise, then, that retail will probably see anemic growth while the industrial and logistics sector will flourish in the coming year.

Workforce challenges: The COVID-19 pandemic has reshuffled the workforce in ways that could not be anticipated last year. The hospitality sector was particularly hard hit as millions dropped out of the workforce or found work in other sectors that offered more stability. Now, as people return to traveling, the industry is scrambling to find enough help. This staffing shortage may depress growth until more people re-enter the workforce.

Tax changes: Tax hikes appear to be on the horizon in the form of the Build Back Better Act. Owners, developers and investors will need to wait until a final bill is voted on before making long-term investment decisions. The good news? Many of the strategies that have been used in the past to defer tax liabilities will likely be available going forward.

Accelerated technology adoption: Technology services and solutions are rewriting how the real estate industry does business – and not just in terms of bridging the home and office environments. The ease of working with and for a company is emerging as a deciding factor in winning over clients and talent. Stakeholders will need to invest in a strategic digital transformation plan if they want to keep pace with stakeholder expectations. Digital capabilities will also be key to managing data and predicting outcomes – both of which will be necessary in this dynamic landscape.

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Source: Expect still more uncertainty in commercial real estate this year

https://www.creconsult.net/market-trends/expect-still-more-uncertainty-in-commercial-real-estate-this-year/