Multifamily and industrial properties were the leading sectors in 2022. With healthy balance sheets, consumer demand boosted retail, multifamily, and industrial asset classes. While the industrial boom continues multifamily absorption and rent growth are decelerating.
Multifamily absorption in the last four quarters was below the pre-pandemic levels, in the range of 60,000-70,000 units. In the meantime, rents rose annually at a slower pace, by less than a double-digit percentage.
However, multifamily housing demand remains relatively strong. Considering rising mortgage rates and home prices, people may be forced to rent for longer due to decreasing affordability.
As inflation continues, consumers cut back on spending, the net absorption of retail store space decreased to 16 million sq. ft. in the third quarter of the year.
However, neighbourhood retail that offers in- person services continues to advance. Net absorption for neighbourhood centers rose by 35 percentage points compared to the second quarter of the year.
As the country navigates hybrid work, the office sector continues to struggle. Although more people return to their offices, after four quarters with positive net absorption, demand for office space dropped as net absorption turned negative again.
Inflation, interest rates, supply chain, and geopolitical events are the main factors that will determine how commercial real estate will perform in the following months.
Credit: NAR
25th Sept 2022- Ravindra Yadav