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According to real estate data firm Yardi Matrix, in September, asking rents nationwide broke new records with an average increase of 11.4 percent compared to the year before. Asking rents are now at an all-time average high of $1,558, though there might be signs that rent growth is finally moderating, note Yardi Matrix researchers, with an increase of just 1 percent in September, the lowest level in about six months.
The firm broke down which markets are currently seeing the highest rent growth and which are forecast to show the greatest increases through the end of 2021.
Over the past year, we've talked to multiple commercial real estate insiders who were raising money for or already deploying commercial real estate funds to gain insight into how the process has been changing as a result of both the COVID-19 pandemic and new technologies for reaching potential investors. Our sources ranged from Blackfin Real Estate Investors, a Virginia-based firm that focuses on value-add plays, to Los Angeles-based Cottonwood Group, which goes after diversified, larger scale projects, to Martin Muoto, whose firm SoLa Impact puts an emphasis on a social equity compoment.
In the following gallery, we talk to 12 investment firms about their pandemic era equity-raising efforts, as well as the strategies they are pursuing for investing in commercial real estate.
According to data firm Yardi Matrix, weather-related events caused $268 billion in damages worldwide in 2020 alone. To help real estate investors assess the risk of purchasing properties in specific markets, Yardi Matrix created a natural disasters scorecard for 21 largest U.S. metros that looks at the likelihood of hurricanes, tornadoes, wildfires and rising sea levels. The scores range from 1 to 3, with 1 indicating above average environmental risks and 3 indicating below average risk of natural disasters.
This gallery looks at the scores for cities ranging from Atlanta to Orlando, in reverse order of risk from highest to lowest.
While the single-family rental (SFR) sector has been performing extremely well in recent months, SFR properties in some U.S. counties remain at higher-than-average risk of default, according to an August report from data firm RealtyTrac. The firm has been putting together a Default Risk Score (SCR) for 3,143 counties throughout the U.S., based on each county’s percentage of SFRs, unemployment rate and SFR loan-to-value (LTV) ratios. Its latest tally contains both good and bad news. The good news is that the average DSR for SFR properties in 100 largest counties by property count declined by 16 percent in six months, to 36.7 from 43.6 on a scale of 1 to 100. The bad news is that 45 percent of the counties the firm tracks remain at elevated risk of default.
This gallery offers the most recent breakdown of the 10 counties with the highest and the lowest levels of risk of SFR defaults.
A a report released in June by real estate services firm JLL called Worker Preferences Barometer, which collected insights from 3,317 office workers from 10 countries, found increasing burnout surrounding full-time working from home among the people it surveyed. The share of people who felt more productive working at home than in the office fell to 37 percent in March of this year from 48 percent in April 2020. Sixty-one percent said they were craving “real life” human interaction with coworkers and 52 percent said they missed the “change of scenery” working from the office allowed them.
In the following slides, 10 office experts share their views on when a full-scale return to the office will occur and how that return will unfold. While the return timeline is accelerating nationally, there will likely be difference between different regions of the country and companies of different sizes.
As the U.S. economy gears back up in the wake of the pandemic and global supply chains issues play havoc with the availability of various goods, construction prices are going up. A recent report from the real estate services firm JLL found that from August 2020 through August, the average final construction cost for commercial properties in the U.S. rose by 4.5 percent. The firm’s researchers forecast that by the end of the year, total construction costs will have increased by more than 6.0 percent, followed by a similar increase in 2022. When it comes to construction materials specifically, the average cost of a commercial development project rose by 23.1 percent during the period. In fact, materials supply issues have been responsible for 22 percent of commercial project delays this year, the second most significant factor after owner-led decisions. In 2020, those types of issues accounted for just 3 percent of project delays. And the issue might last for another year—JLL predicts that construction materials costs will rise by another 5 to 11 percent over the next 12 months.
To show where the most striking increases are showing up, JLL put together a construction material volatility ranking, showing which materials have seen the greatest swings in prices recently. To see which materials are seeing the most volatility and which are the least volatile, click through our gallery.
Throughout the COVID-19 pandemic, technology companies have been among the first to institute work-from-home orders and among the most vocal about switching to remote work permanently. At the same time, many of them have been expanding their office footprints at a much faster rate than other types of corporate occupiers. In a continuation of that trend, tech companies accounted for 22 percent of all U.S. office leasing during the second and third quarters of 2021, reveals the most recent Tech-30 report from commercial real estate services firm CBRE, which looks at U.S. and Canadian markets. The figure marks an increase from the 17 percent of all office leasing that tech companies accounted for in 2020. What’s more, their office leasing activity rose by an average of 122 percent in the second and third quarters of this year compared to the first.
Of course, certain markets have benefitted much more from tech companies expanding their office holdings than others, leasing to greater positive net absorption and, in some cases, double-digit growth in office rents over the course of the past two years. CBRE broke down where office rents have increased the most from the second quarter of 2019 through the second quarter of 2021 and how those figures correlated to the markets’ tech job growth.
CBRE provided WMRE with an early look at its 2022 Real Estate Market Outlook.
The firm is maintaining a positive outlook for the broader economy and the commercial real estate sector itself in spite of some of the recent uncertainty over potential impacts of the COVID omicron variant and other risks.
The new variant may yet again push back a large-scale return to the offices, but overall economic conditions remain strong and "fiscal and monetary policy remains highly supportive of economic growth." In addition, CBRE Global Chief Economist and Global Head of Research Richard Barkham wrote that "factors that held back growth in 2021—labor shortages, supply disruptions, inflation and other COVID variants—will ease. Monetary policy will tighten to keep longer-term inflation pressures in check, which may trigger some short-run volatility in the stock market, but it will not be enough to dampen investor demand for real estate."
In fact, CBRE expects 2022 to set a new record for commercial real estate investment, facilitated "by high levels of low-cost debt availability and new players drawn to real estate debt’s attractive risk-adjusted returns."
The following slideshow includes excerpts of the report along with the key industry stats guiding CBRE's outlook.
