Will the hottest commercial real estate markets of 2021 remain hot in 2022? Because of the cyclical nature of commercial real estate, the markets can change from year to year. Areas where there were great opportunities with rising appreciation and tenant occupancy rates one year could stall off the next. Events like the COVID pandemic can also cause shake ups that totally change the CRE landscape.
When you are in the position to invest anywhere in the country it pays to pay attention to commercial real estate trends and data. When you stay on top of the commercial real estate statistics in the United States, you’ll quickly see which cities offer the most opportunity and which metros are slowing down. Corporate real estate teams that use data to their advantage can save themselves time and money during the decision-making process and identify the best opportunities ahead of the competition.
So, what will be the top commercial real estate market in the United States during 2022? That depends on the asset class along with a few other key considerations.
What experts are predicting to be the top commercial real estate market in the United States during 2022 is driven by trends in CRE data. Based on our analysis there are four key commercial real estate trends that are expected to impact markets in the coming year.
The work from home trend shows no sign of letting up in 2022. Because of that, where people call home is changing. We’ve seen significant shifts in where people live, which is reshaping the commercial real estate markets in many metros. Analyzing migration trends is one of best things corporate real estate teams can do to find the hottest commercial real estate markets as they’re heating up. Space utilization is another indicator. Analysis of data that can be tracked with CRE software solutions shows up to 15% less office space utilization between now and 2024.
One of the changes that have come with the work at home movement is growing interest in smaller metros that are more affordable. If office space is the asset of choice, smaller metros with stable growth and affordable cost of living are the safest bet, especially compared to major metros with central business districts where there’s an abundance of office space post pandemic. Keeping a close eye on historic and current occupancy rates will tell brokers and CRE teams if a smaller market is among the best cities for commercial real estate in 2022.
Industrial helped boost overall CRE values in 2021, and that isn’t expected to change in 2022. Of course, it’s a trend that began about a decade ago as e-commerce chipped away at brick and mortar retail business. The circumstances over the last few years have only accelerated the pace of e-commerce growth.
As demand for industrial space has grown, brick and mortar retail has shrunk. However, the pandemic proved that essential brick and mortar retail such as grocery stores and chain pharmacies are somewhat incubated from the buy online trend. When investing in retail space it’s a good idea to look at areas that are growing in population that have a need for more of these essential retailers along with available land or spaces that can easily be retrofitted to accommodate them.
Based on the trends above and analysis of our internal CRE data, here’s what we’re predicting will be the best cities for commercial real estate in 2022.
Nashville isn’t just a mecca for musicians. This hip Tennessee city is also attracting a lot of employers, which is why future job growth is expected to be well above the national average. Like other metros on our list, the tech industry is growing in Nashville. It’s helping make the local economy more diverse and more stable as the population grows.
The Nashville metro made NAR’s list of the hottest real estate markets in 2021, and little has changed since then. One thing that is certainly working in the city’s favor is relatively low climate risks compared to other metros, which is a growing concern among CRE investors. Over 80% of the Urban Land Institute and PWC’s annual survey said Environmental Social Governance (ESG) was a top decision-making consideration. Nashville also had difficulty meeting the spike in housing demand over the last few years so multifamily projects are a priority for the city.
Austin is still one of the hottest commercial real estate markets in the country just as it has been for the last decade. The city is the capital of Texas in the center of the state and has been a tech hub since the Dell days in the 1990s. It’s also known for being an eccentric, eclectic city that leads the way in eco-friendliness.
Tech is what’s driving commercial real estate markets today in the “Silicon Valley of the South”. Large office buildings are still occupied by companies like Apple, Tesla, and Oracle, despite many workers being able to work at home. That could possibly be since flex work schedules have been common in Austin for some time. With the high paying tech jobs has also come several housing developments and retail buying. All-in-all, Austin is a metro where various CRE markets are outperforming the national average.
Atlanta continues to present ample opportunities for CRE investors as the population grows. It’s a cultural hotspot where the suburbs are exploding in all directions. In recent years Atlanta significantly grew it’s manufacturing and supply chain sectors, which has helped to make the local economy even more diverse. Paired with its #1 ranked business climate, there’s no reason to believe development and investment will slow much in 2022.
If you want to add retail to your CRE portfolio Atlanta is a sound option. While other metros struggled just to hold their retail value, Atlanta saw its price per square foot increase nearly 7% quarter-over-quarter since 2019 and asking rents increased over 2.3%. Multifamily properties are another good bet given the continued growth in the population. In 2021 the city made NAR’s short list for the top cities where renters are moving.
Boston is a historical U.S. city that has been an urban epicenter for over a century. It’s also one of the few major metro gateway markets that’s expected to still have slow growth and strong CRE demand. That’s largely due to its booming life science industry that’s among the largest in the world. It’s also considered the most liquid CRE market in the county.
For investors in the office market, Boston is still attractive. Unlike New York, San Francisco, and other mega metros, leasing activity is high. In fact, it reached pre-COVID levels in September 2021. The tenants-in-the-market (TIM) index was recently scored at 125 and activity scored an astounding 210, well above the national averages.
Phoenix is known for being hot in terms of summer heat, but the CRE markets are also heating up. The city has been a mecca for retirees, but now people of all ages are moving into Phoenix due to affordability. The growing population is fueling demand on all levels of commercial real estate.
Phoenix is another city where retail appears to be recovering in recent months. Just as important for CRE brokers is the fact that industrial space is growing. By the end of 2021 there were 70+ industrial properties with more to come. An alternative sector with strong promise in Phoenix is senior housing developments that cater to all the retirees.
Florida is attracting more people from across the country now that they have the option to work at home, and Tampa is one of the cities where they’re moving. Sitting on the Gulf of Mexico, the picturesque Tampa Bay area is home to not one but four major league teams that bring in vacationers year-round. But tourism isn’t the only booming industry. Technology and maritime industry are two other sectors fueling the economy.
Housing developments are in the works across the Tampa Bay metro, which isn’t surprising given that the city had over 25% y-o-y rent growth in Q4 2021. For CRE investors that are interested in multifamily properties, Tampa Bay is a strong market that will likely grow in 2022 and beyond.
California may be making headlines for shrinking CRE markets and migration out-of-state, but the international vacation spot of San Diego has always been a shopping mecca that also has a strong military presence and medical industries that shore up the local economy.
CRE teams that plan to invest in high-end retail will be well-positioned in San Diego. There are also plans to expand outward in more of the suburban areas providing potential for new developments in essential retail as well.
Some might be surprised to see San Jose on the list of best cities for commercial real estate, but its resilient high-tech industry is keeping employment numbers up and fueling the rise in home prices. The vibrant city continues to attract highly educated young workers that are needed to keep the tech industry running on all cylinders.
Just a handful of years ago San Jose was ranked the #1 market for office space in the country. Even with the pandemic, San Jose has maintained a stable office market with vacancy rates that are below average. The net worth of residents is one good reason to consider San Jose for retail investment as well. Despite the pandemic, household income grew from $115,893 in 2019 to an estimated $142,635 in 2021. Of course, ESG is going to be a top concern in this California city that has been impacted by wildfires.
Many people have compared Portland to Austin given its cool factor that has drawn people from around the country to the northwest. Creativity and outside-the-box thinking has also helped the local economy bring in an educated workforce that’s ideal for major industries like high tech and healthcare.
In 2021 Portland was in recovery mode as retail stabilized and vacancy rates slowly declined. Now 2022 is expected to be even more positive based on net absorption in the last few quarters. The city’s penchant for creative thinking makes it a prime market for flexible spaces that can serve startups and existing companies that are changing the way business is done.
Raleigh caught people’s attention when it made the shortlist for Amazon HQ2 shortly before the pandemic. The city is part of “The Research Triangle” which also includes Durham and Chapel Hill. It’s an area that has three major research universities that have encouraged growth in the biotech and technology industries.
Like Phoenix, Raleigh is a good market for CRE teams that are interested in alternative sectors. Here multifamily developments built for student housing could have a very good return. After vying to be the next Amazon headquarters, local experts say that Raleigh is in an even better position to attract a mega-project on that scale because all three cities are now invested in working together to make it happen.
Predictions are already being made for 2022 largely based on commercial real estate statistics in the United States and the latest data that is coming in from a variety of sources. CRE experts and analysts are expecting commercial real estate prices to increase by 10% collectively based on the data. That’s welcome news for commercial real estate teams that are looking to keep the 2021 momentum going.
CRE teams can give themselves a competitive edge by analyzing the information just as RefineRE’s market data was used to create our list of the top commercial real estate markets in the United States. A data aggregation platform like RefineRE that provides a feed of new data helps keep CRE teams abreast of emerging trends that would otherwise take months to see happening in the markets.
Reliable, real-time data and the ability to analyze it is key to adapting to the changing market conditions. Demand is on the rise as markets come out of the pandemic, the question is which markets will be the hottest. Data is what brokers, occupiers and corporate real estate teams need to hone in on where demand is the highest in different asset classes.
Exclusive access to new data on the RefineRE platform is the type of leverage that’s needed to quickly target emerging markets, expand to new markets or pivot as market conditions change. The Market Intelligence solution is a must for CRE investment. It can be used to analyze CRE lease data, evaluate primary markets and submarkets, see trends based on data over the long-term and more accurately predict risks. There are also asset-specific solutions such as FLEX that can be used by teams to determine how office space can be better utilized whether utilization rates are going up or down.
Want to see how RefineRE’s commercial real estate solutions work? Schedule a complimentary demo of the RefineRE software for a look at how your team can leverage valuable CRE data in 2022.