It may not be full smooth sailing yet for commercial real estate professionals, but many brokers are relieved to be putting the rough seas of 2020 behind them. CORFAC International, the network for independently owned commercial real estate firms, asked members about the state of their business and their local markets in its mid-year 2021 Business Impact Survey. The vast majority of responding members had positive news to report.
While the disruption of the pandemic isn’t quite over – especially with the Delta variant adding some choppiness – deals are closing in markets across the United States, and new business pipelines are refilling. Workers who hadn’t already done so are returning to in-person work, meetings and business travel, and that’s having an impact on CRE, too.
“Though technology will certainly continue to evolve and impact the real estate business, the value of face-to-face meetings and real-world building tours and site visits can’t be denied,” said Joseph Latina, President, CORFAC International and Principal, Patterson-Woods Commercial Properties/CORFAC International in Wilmington, Delaware. “Everyone in our network is excited and active, making connections and getting out in the market with their clients to get deals done.”
Activity and optimism are trending up
The CORFAC member survey revealed that deal momentum is growing. One in four respondents said their Q2 2021 transaction activity increased significantly as compared to Q1 2021, and another 36percent of those surveyed reported a slight increase.
As noted by Latina, live interactions are helping fuel the activity. A resounding 85 percent of respondents expect to have more face-to-face interaction with their clients in the next six months. And, 80 percent of those surveyed expect even more new activity in the next six months as a result of post-pandemic reopening.
Business sentiment is also on the rise. About 45 percent of respondents described business sentiment in their market as very positive, and another 41 percent said it was somewhat positive.
Sources of new business for independent brokers
American businesses are making moves. New business is coming from not only clients who are already in the respondents’ markets, but from new clients who are relocating. When asked about sources of new business, members identified new clients locating to the market (65 percent) and current clients expanding (60 percent) as the top sources. Current clients who are downsizing has declined to 36 percent from 51 percent in the first quarter of the year.
Industrial and manufacturing transactions continue to drive CORFAC members’ 2Q 2021 business activity with 69 percent of respondents selecting this subsector. CORFAC brokers’ experience bears out in national statistics from the field. According to research from Yardi Market Insight, industrial sector vacancy rates averaged 5.8 percent in 30 top markets nationwide and were below 3 percent in multiple markets, including Indianapolis and Columbus, Ohio.
Ecommerce (47 percent), office subleasing/disposition (27 percent), cold storage/warehouse (25 percent), and adaptive reuse (24 percent) were other key subsectors for CORFAC members in the second quarter.
What’s giving CORFAC brokers pause
Though both sentiment and activity is rising, some areas of concern were cited, including concern about tax code changes particularly to 1031 Exchange rules, availability of space in growing sectors, and, of course, continued effects from the pandemic, including the rise in cases due to the COVID Delta variant.
Another key issue affecting clients’ real estate decisions is the tight labor market. Companies in every sector, including retail and hospitality, manufacturing and professional services, are having difficulty filling open positions. In turn, companies may be delaying decisions such as expanding or moving spaces or signing long-term leases.
Despite these uncertainties, the survey shows CORFAC brokers are entering the final months of the year with both improved optimism and activity. The strength of industrial is buoying the industry, and the greater ability to meet with clients is helping bring deals to fruition.