The new year has brought with it less-than-ideal economic forecasts. Predictions of market instability, inflation and increasing interest rates have investors tightening their purse stings and protecting their assets. However, there is a bright light at the end of the tunnel; market experts predict that although market volatility is expected across industries, it will hardly impact the demand for real estate. This is great news for anyone looking to buy in to commercial property or expand their current property portfolio. Here’s a glimpse of what’s in store for this year’s commercial real estate market:

1. Economic growth:

Despite record inflation rates due to complications brought on by COVID-19, price increases are expected to max out at no more than 2.5% for the year. Likewise, interest rates, which had dropped drastically in 2019-2021, will reach 2.3% by the end of the year, returning to pre-pandemic averages. While some market volatility is undoubtedly in store, it’s unlikely that economic shifts will be substantial enough to impact property portfolios and future investment opportunities.

2. Low-cost debt:

The availability of low-cost debt, especially in real estate, will continue to serve as strong incentive for new and returning investors. Although commercial property value will continue to rise, the provision of risk-adjusted returns will motivate buyers to pursue higher value properties with the promise of maximum future returns.

3. Post-pandemic revival:

Sectors most impacted by the COVID-19 pandemic, including retail, office, and multifamily, will see a surge in demand coupled with a push for modernization. A return to in-person work combined with the increasing popularity of hybrid work schedules will drive a revitalization of traditional office spaces. Although retail growth is expected to move more slowly, market projections predict a prolonged surge in consumer spending as vaccination rates increase.

4. ESG Investing:

Each of these commercial sectors will likewise be affected by growing investor interest in environment, social and governance (ESG) initiatives. ESG will lead to increased demand for more efficient properties and sustainable retrofitting. State and federal legislature is also expected to play an increasingly important in ESG investments and reporting as regulatory bodies shift their focus to prioritize ESG compliance.

5. Policy changes:

Recent and upcoming policy changes include the Infrastructure Investment and Jobs Act and a $1.75 trillion social spending bill. These changes will support improved economic growth over the next 10 years, leading to improved market development, greater support for local businesses and stronger assistance for low to mid income workers.

These initiatives will be coupled with a sustained revitalization and expansion of infrastructure with a focus on green initiatives and affordable housing. Together, the upward economic trend and property development resulting from ongoing policy updates will lead to increased opportunity and value in commercial properties.

Final thoughts

So, what does this mean for you? Although recent market trends have stirred up anxiety and uncertainty, most projections suggest overall positive economic growth is in store for 2022. Whether you looking to expand your property portfolio or shopping for your first investment, doing so with thorough market research and one foot in the future will promise the highest pay off. A professional commercial real estate agency like Granite can assist you with brokerage and even commercial real estate development. 

Consider the trajectory of office culture, retail and consumerism, and urban housing, and pay close attention to ESG initiatives and upcoming policy changes, as both will dictate where to concentrate your investing power. As always, commercial property investment holds a wealth of opportunity and promises consistent returns in 2022. Contact us for professional assistance, and save money. We’ll make sure you get the most out of your investment.