Even with the COVID-19 pandemic and continued supply chain disruptions, investors are eager to sink their dollars into U.S. commercial real estate assets as the new year begins.
That’s the takeaway from RICS Global’s fourth quarter 2021 Global Commercial Property Monitor, a survey that studies the trends in the commercial property investment and occupier markets every quarter.
According to the most recent survey, investors are as enthusiastic now about investing in commercial real estate as they have been since the first quarter of 2016. This is partly because of accelerated demand from both occupiers and investors during the fourth quarter of 2021.
It helps, too, that the survey found that capital values and rents are now expected to experience stronger growth than previously predicted in earlier quarters.
This isn’t to say that there aren’t challenges ahead in 2022. Survey respondents said that they were concerned about the Omicron variant, especially with how it might impact the occupier market.
Still, the report contained mostly good news. Respondents across the United States upgraded their projections for capital value growth in the year ahead, with the all-property average hitting its highest level since 2016.
In little surprise, RICS’ survey found that in the United States, respondents pointed to the industrial sector as the strongest asset class. They predicted that the value of industrial assets would rise by 10 percent during the 12 months of 2022.
Respondents were also high on multifamily and data center assets. They were less excited about the office and retail sectors, with respondents predicting flat growth in these asset classes during the next 12 months. Still, that is an improvement from the first three RICS surveys of 2021, when respondents predicted negative value growth in these classes.
One possible headwind for commercial real estate? Overvaluation. A total of 60 percent of U.S. survey respondents said that commercial real estate values are now too expensive. Expect this sentiment to increase throughout 2022 as CRE values continue to rise.
“The enthusiasm across the U.S. and Canada is highly encouraging for investors, owners, tenants and capital markets, and the relatively quick rebound is a testament to industry resilience and market responsiveness,” said Ann Gray, president-elect of RICS, in a written statement. “Valuation issues likely stem from the high uptick in leasing, sales and lending activity over recent quarters, and it’s expected that the market will ultimately stabilize to values in line with fundamentals, despite some short-term alignment concerns.”
