According to a mid-2021 Coldwell Banker Commercial (CBC) report, national-level commercial real estate activity has returned with some clear winners and losers.
CBC sees strengths in the industrial equipment, warehouse and online rental markets, while the hospitality, retail and office rental markets continue to be a concern.
Commercial landlords and tenants have adopted approaches that show they expect inflation to continue. Lease agreements are signed with a consumer price index and a rent increase of 4 to 5 percent, up from the usual 2-3 percent.
CBC specialists in several leading markets also report a slight slowdown in development rates since the beginning of the year due to a sharp increase in material costs.
Record amounts of money that had been lying by the wayside returned to the market, but investors found there were few products available. While low interest rates led to lower capitalization rates during the COVID-19 pandemic, rather than key operating numbers, there remains ample room for squeeze as frustrated buyers are now open to buying properties at much lower rates than they ever anticipated before the pandemic. … Interestingly, the markets did not experience a wave of distressed real estate caused by the pandemic.
The 1031 exchange program has an uncertain future and this is a key factor for investors to consider. This transaction tool became popular during the pandemic, sparking another surge in demand for real estate replacements, as well as feeling the need to close deals quickly. Listed investors who prefer more passive investments avoid apartment buildings, multi-use shopping malls and real estate properties that require more day-to-day management.
This is a national picture. As for Grand Junction and Mesa County, the overall commercial real estate market has been strong in the first six months of this year. Most of the demand was for apartment buildings, industrial and land plots, as well as warehouses. Interest in retail and office has been mixed.
Investors ruled the real estate market in the first half of the year, and I expect this to continue until the end of 2021.