As 2021 came to a close, CORFAC asked its real estate professional members to take stock of their business and where it was headed. The good news? Largely, members began 2022 with optimism, according to the survey.
Despite some continued uncertainty in the marketplace, CORFAC members say that deal volume has increased and new business opportunities have diversified. This left brokers looking forward to a stronger rebound than they experienced last year.
“We’re thrilled to see positive momentum across our membership and plenty of opportunities yet to come in a capital-rich environment,” said Mason L. Capitani, principal of L. Mason Capitani/CORFAC International in Detroit, Michigan, and 2022 President of CORFAC International. “We’re especially focused on continuing to strengthen the connections between our firms that led to the increase in cross-network deals and referrals in 2021.”
Deal activity continues upward trajectory
On the activity front, one in three CORFAC members say their transaction activity has increased significantly when midyear. Another 35 percent say it has increased slightly.
New business is coming from a strong mix of sources, including new customers entering the market (70 percent); current customers that are expanding (63 percent); business won from a competitor (33 percent); and referrals from other CORFAC members (20 percent). Multiple CORFAC brokers also mentioned an exodus of companies leaving California and entering central U.S. markets.
Changes and challenges in the marketplace
When asked what CRE sector they thought would change the most in 2022, a resounding 56 percent of members selected office. Many CORFAC members said they expect that companies will bring back more professional workers as COVID infections decrease in number and severity.
However, with more flexible policies towards remote work also in the mix, companies may find that they still need to right-size their office space to reflect the true number of employees who will be working in person on a given day. Other firms might look for new spaces or renovations that better address hybrid work or offer amenities to entice and retain employees. So, while office may not be the favored CRE class for investors, leasing activity should be robust for brokers.
CORFAC members were also asked about issues more broadly affecting CRE. About 42 percent of members identified supply chain delays as a top issue affecting the industry, and 31 percent pointed to labor shortages affecting their clients’ businesses.
These issues are not unique to the real estate industry, but are creating pricing and timing pressure for developments and redevelopments and delays in companies making decisions about office or warehouse space needs. Inflation and concern about the future of tax laws related to 1031 exchanges for investment properties were also weighing on members’ minds.
Why CORFAC members Are optimistic
Despite the concerns reflected in the survey responses, many CORFAC members are seeing the light at the end of the pandemic tunnel. The top causes for optimism in 2022 include: more workers returning to offices (61 percent); growth of ecommerce fueling industrial deals (48 percent); and COVID-19 impacts decreasing in their market (46 percent).
The overall business outlook was also heartening, with 81 percent of members responding that the sentiment in their markets was somewhat or very positive. Members pointed out that businesses that have fared well the last two years are now in a position to expand. The glut of liquidity in the marketplace also bodes well for deal activity.
As companies look to long-term planning again, their real estate needs – whether expansion, moving to an inland market, or changing their office footprint – will be part of their strategy. CORFAC brokers are eager to help clients take advantage of the opportunities in the Midwest market.
