Strong fundamentals fueled by stable cash flows and pent-up demand
While rents were pressured early in the COVID-19 pandemic as tenants returned space to the market and delayed new leases, the economy came roaring back in 2021 with 18.5M jobs (out of 22.4M lost during the pandemic according to the Bureau of Labor Statistics) - contributing to confidence in the property market and helping to push commercial property values to a 15-year high in the third quarter. 2021 transaction volumes rose 55% over 2020 and were 15% above 2019, led by multifamily, life-science, warehouse and distribution properties.
When COVID-19 changed work and home life at the end of the first quarter 2020, commercial real estate sales and leasing activity slowed significantly due to the uncertainty. As the year progressed, market activity returned producing clear winners and losers - strength in the industrial, self-storage and net-leased markets, worries in hospitality, retail and office leasing markets. The pandemic exacerbated changes already taking place in the economy, such as e-commerce, ghost kitchens and millennial home buyers, which drove commercial real estate activity in 2020. Prices fell far less than after the 2008 financial crisis and are already rising again. Buyers/sellers and landlords/tenants are adjusting to the 'new normal' and transactions are closing - with some new concerns about the future.