Industry insights, market outlook reports and commercial real estate
news, and trends from the Coldwell
Banker Commercial brand.
While the overall economy has proven to be resilient to interest rate increases, the gap between buyers and sellers on cap rates is still pretty significant, which has resulted in lower transaction volumes compared to the prior year. In conversations with Coldwell Banker Commercial professionals across the country, only a few markets are seeing sellers come down on pricing to meet buyers’ expectations and create deal terms that make sense in a higher interest rate environment. The majority of property owners prefer to hold on to their assets hoping for increased valuations over last year. Buyers are trying to put deals together but believe pricing should be 10-15% less than what sellers are asking for. Properties will move only if priced right, and even then, deals are slower to close (which is an improvement from the “no-decision” days of last year). While real estate is still a desired asset class, nervousness about timing is holding buyers back. A slowing domestic economy, rising interest rates with an uncertain end and the war in Ukraine has led many investors to park their money in risk-free bonds while they wait for values to come down. Cap rate spread over 10-year US treasury yields are below historic average spreads across all property types.
Previous segments of this blog series touched on the disconnect between workers and employers, the shifting priorities and values of the general workforce and the role management and leadership plays in DEI initiatives. In this final installment, we dive into what it will take for savvy companies to position themselves for success.
There’s no disputing that as an industry, commercial real estate lags in terms of diversity, equity and representation. It’s also undeniable that industry leaders have taken great measures over the past decade to catch up. Despite this, there’s plenty of room for improvement—especially for companies looking to retain and maintain a diverse, productive and satisfied workforce.
While the past few years have seen brick-and-mortar retailers embrace big-box stores with large footprints, a recent study from placer.ai found that smaller stores come with their own set of benefits. A growing number of tenants are experimenting with reduced footprints in a variety of ways.
Rising sea levels are threatening millions of acres of land and properties and billions of dollars in real estate tax revenue for coastal cities. After the devastation caused by Hurricane Ian last year and Ida the year prior, this news should come as little surprise. In 2022 alone, the U.S. has experienced 15 weather and climate disaster events each with losses exceeding $1 billion and 342 collective deaths, according to the National Oceanic and Atmospheric Administration.
In a reversal from sentiment at the beginning of this year, investors are becoming increasingly bearish about the commercial real estate market. Faced with an economic slowdown, inflation, rising interest rates, supply chain issues, labor shortages and the threat of a recession, investors and capital providers to take a step back and reassess their strategies as this year concludes and the next begins.
Commercial real estate activity remains elevated in 2022, which is a promising sign considering record-highs were reached last year. Market activity is being paced by three property types, multifamily, industrial, as well as a strong rebound in retail. A new Mid-Year Report from Coldwell Banker Commercial shows investors were eager to unlock cash flow and pushed cap rates to record-lows in 4Q21 and 1Q22 across most sectors. It is anticipated that demand for real estate will continue to be strong for high-growth markets. These positive signs comes despite widespread supply chain disruptions, inflation and political uncertainty around the war in Ukraine.
New research from Yardi Matrix indicates average apartment rents increased by $10 in July 2022, their lowest rate since January. According to the latest Multifamily Report, the average rent in the U.S. was a record $1,717 last month. Still, year-over-year growth decelerated by 110 basis points to 12.6 percent, 260 basis points off the February peak of 15.2 percent.
Since the start of 2022, there’s been a massive wave of new residents streaming into Florida. Remote work, warm weather, and looser COVID restrictions have played a significant role in the Sunshine State becoming the most sought-after region by renters this year. Miami specifically is considered the hottest rental market in the nation. In fact, demand for apartments in Southern Florida is stronger than ever, making it difficult for apartment hunters to find a place to call home. According to a report by RentCafe, this is due to high occupancy, low supply, and record-high lease renewal rates.
In part 1 of CBC’s Consumer Behavior Shifts & How it Impacts Real Estate blog series, we discussed the ways in which consumer behavior has changed over the past two years and how those changes impact every facet of retail strategy. In part two, we will dive into the long-term impact of COVID on consumer behaviors and patterns, how these patterns are impacting both the restaurant and retail industry, and the effects of online shopping.