Commercial real estate hasn’t seen the same searing momentum as residential during the pandemic, but industry experts are bullish for 2022 overall, especially the second half of the year.
The big picture: Office buildings are the primary concern for the commercial real estate sector, while the industrial warehouse and multi-family housing markets are expected to perform well this year.
Desks: DC’s office vacancy rate, which was a problem before the pandemic and has since worsened, reached an all-time high of 18.4% at the end of 2021. It is expected to remain high for the foreseeable future and may not never reach pre-pandemic levels.
However, CBRE Mid-Atlantic Research Director Wei Xie has found buildings that were difficult to rent before the pandemic have remained empty, while trophy buildings are doing well. These buildings are located in popular neighborhoods with desirable amenities and come with higher rents.
- The success of trophy buildings highlights the growing importance employers place on providing spaces in which people enjoy working.
CBRE data also revealed that a small number of buildings represent a high percentage of the total vacancy.
- Job growth is expected to increase in the district this year, which could improve the office vacancy rate.
Industrial: The pandemic-induced e-commerce boom has been beneficial to the industrial warehouse market, said Ian Anderson, senior director of research and analysis at CBRE.
- Over the next 18 months, the DC area is expected to build an additional 6.3 million square feet of industrial warehouse, he said. That’s enough warehouses to fill the National Mall.
Several families: A lack of multi-family housing is fueling the nationwide affordability crisis, Anderson adds. The DC region will build and deliver more multi-family units in 2022 than in the past 25-30 years, and that still won’t be enough.
- Vacancy rates in this market are low as multi-family tenants continue to return to the district.
Retail takes advantage of the success of collective housing. But, the winter outbreak of COVID could delay retail progress until the second half of the year.