Commercial real estate hasn’t gotten the same red-hot momentum as residential during the pandemic, but industry experts are optimistic about 2022 overall, specifically the second half of the year.
The big picture: Office buildings are the big point of concern for the commercial real estate industry, while the industrial warehouse and multi-family housing markets are projected to have solid performances this year.
Offices: D.C.’s office vacancy, which was a problem before the pandemic and has since gotten worse, reached a record high of 18.4% at the end of 2021. It’s expected to remain high for the foreseeable future, and may never reach pre-pandemic levels.
However, CBRE Mid-Atlantic director of research Wei Xie found buildings that were tough to lease before the pandemic have remained empty, while trophy buildings are doing well. These buildings are in popular areas with desirable amenities and come with higher rents.
- The success of trophy buildings highlights the increased importance employers are placing on providing spaces that people enjoy working in.
CBRE data also found that a small number of buildings account for a large percentage of 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 good for the industrial warehouse market, says CBRE senior director of research and analysis Ian Anderson.
- Over the next 18 months the D.C. region is projected to build another 6.3 million square feet of industrial warehouses, he says. That’s enough warehouses to fill the National Mall.
Multi-family: A lack of multifamily housing is fueling the nationwide affordability crisis, Anderson adds. The D.C. region will build and deliver more multi-family units in 2022 than in the last 25 to 30 years, and that still won’t be enough.
- Vacancy rates in this market are low, as multi-family renters continue to return to the District.
Retail is benefiting from multi-family housing’s success. But, the winter COVID surge may delay progress in retail until the second half of the year.