Indexes for Office, Medical Office, Industrial and Retail Sectors All Up Significantly
August 16, 2021
Houston – Insights gathered from Transwestern’s Midyear 2021 Commercial Real Estate Market Sentiment Survey paint an optimistic picture of commercial real estate performance over the next 12 months. While it is no surprise that the industrial and medical office sectors are expected to see continued growth, the office and retail sectors, which were hard-hit during the pandemic, also registered stronger market expectations, according to Transwestern’s national market indexes. Brokers and analysts across Transwestern’s 33 U.S. offices contributed to the report.
“CRE recovery will be staggered, especially for office and retail due to the continued unpredictability of COVID-19 mutations,” said Elizabeth Norton, Senior Managing Director of Research Services at Transwestern. “However, we believe office tenants will begin to come off the sidelines in the coming months as several tenants who pushed the pause button will need to make a lease decision. Office construction is slowing, and landlords are holding asking rents relatively steady, so organizations that are growing or simply looking to upgrade space may choose to explore what’s available and potentially lock in favorable concessions.”
The U.S. office market index averaged 103.5, well above the 61.8 registered at midyear 2020, but slightly below 106.9 from year-end 2019. Results predict an uptick in leasing and walkthroughs over the next 12 months, as well as flat asking rents and higher concession packages. Safety and public transportation concerns fueled interest in relocating to the suburbs; however, it’s expected that demand will shift back to CBDs post-pandemic.
The U.S. medical office index averaged 137.7 after registering 90.1 at midyear 2020 and 106.9 at year-end 2019. Although an aging population coupled with recovery post-pandemic will amplify the demand for medical office product, there is some concern that rising construction costs and lack of inventory will cause tenants to consider alternative spaces.
The U.S. industrial market index increased to 150.6, which is significantly higher than the 104.4 registered at midyear 2020 and 116.2 at year-end 2019. Leasing velocity and tenant prospects are expected to rise over the next 12 months with distribution and logistics companies leading the way. The high demand and low supply of quality product is expected to result in increased asking rents and a slight decrease in concessions.
The U.S. retail index averaged 120.3, a significant improvement compared to the 52.1 registered at midyear 2020 and 95.8 from year-end 2019. Expect increased retail, travel and leisure spending, as consumers have more disposable income available, as well as an uptick in the conversion of older vacant retail space for alternative uses, such as medical, event space and self-storage.
Download the complete report, CRE Confidently Carries On, here.
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Transwestern Real Estate Services (TRS) adds value for investors, owners and occupiers of all commercial property types through a comprehensive perspective and by providing solutions grounded in sound market intelligence. Part of the Transwestern companies, the firm applies a consultative approach to Agency Leasing, Asset Services, Tenant Advisory + Workplace Solutions, Capital Markets, and Research & Investment Analytics.
The privately held Transwestern companies have been delivering a higher level of personalized service and innovative real estate solutions since 1978. Through an integrated, customized approach that begins with good ideas, the firm drives value for clients across commercial real estate services, development, and investment management. Operating from 33 U.S. offices, Transwestern extends its platform capabilities globally through strategic alliance partners whose unique geographic, cultural, and business expertise fuels creative solutions. Learn more at transwestern.com and @Transwestern.