Commercial Real Estate Market Predictions for 2022

Commercial real estate is posed to remain stable in 2022, with growth in some areas.

According to NAR’s Commercial Market Insights: December 2021, multifamily units will see lower vacancy rates, while industrial and retail will stay steady and office vacancies will rise as more employees continue to work from home or move to a hybrid model in 2022.

The vacancy rate for multifamily units is expected to be 4.8% in 2022, down from 5.1% in 2021 and 6.7% in 2020. Asking rent growth is supposed to grow a substantial 10%, following a trend since the pandemic. In 2021, asking rent growth went up 7.8%, compared to just 0.7% in 2020 and 2.7% in 2019, pre-pandemic. Due to lack of inventory on the housing market, more would-be homebuyers are forced to rent, leading to more demand of rental units. Additionally, people are returning to larger cities after leaving during the pandemic, which is also leading to increased demand.

As cases of different COVID variants rise and employers are forced to grapple with the consequences of having people indoors together, office demand has dropped again. Office rents are expected to decrease slightly, dropping 0.8%, while they also dropped 1% in 2021. Pre-pandemic (in 2019), asking rent growth for offices rose 3.7%. The number of employees working remotely full-time has dropped since May 2020, but is up since 2019. In November 2021, 17.5 million Americans were working remotely full-time (20.4%), up from 8.9 million in 2019, but down from the peak of 57.4% in May 2020. Many offices have moved to a hybrid schedule, which has led to less space demand and lower asking rents.

The report found that retail sales were up 16% year over year in November, leading retail spaces and industrial spaces to remain steady in demand. The vacancy rate in retail spaces has risen just 0.1% since 2019, while industrial has remained the same since that time period. Both asking rent prices are expected to rise, with industrial jumping 7.4% and retail rising 2.9%.