Q1 Was a 'Turning Point' For US CRE

With the end of the COVID-19 pandemic (potentially) in sight, CRE activity is bouncing back, according to a new report from Crexi. 

The first quarter of 2021 “represented a turning point both for the US and the economic disruption the coronavirus caused,” the report, which outlines key national CRE trends over Q1, states. “While maintaining caution and taking the crisis seriously, the world of commercial real estate managed to steer away from the worst-case scenario and is now poised to capitalize on opportunities both in burgeoning sectors and those most impacted by the pandemic.”

Data from Crexi’s internal marketplace over the first quarter showed that nationally, the average asking price per square foot increased 5.6% from Q4 2020. This number was impacted somewhat by pricing bottoming out in February, when average asking prices were down 6.69% over the month prior, but was tempered by climbing prices in March across asset classes.

For sale listings also showed an increase in average occupancy, which rose to 79.7% in Q1 as state and local economies reopened across the country. Sellers responded, with the number of listings for sale added to Crexi’s platform up 24.17% over Q4, and buyers were busy, with overall property-seeking activity jumping 39.75% since the pandemic began. Since Q4 alone, buyer activity jumped another 25.6%. 

“While some of the quarterly difference can be attributed to Q4′s holiday transaction lull, this number suggests two key findings,” the report notes. Buyers are more confident than any time in the last year of their investing intentions, given the vaccination rollout and continued economic stimulus. More transactional activity is occurring in online forums than before the pandemic. COVID-19 has accelerated digital adoption across demographics and sectors, and we’ll likely see a continued upward trajectory.”

On the leasing side, recovery lagged somewhat, with quarterly asking rents down 1.3% over Q4 2020. Monthly price changes over the first quarter followed a U-shape, with consecutive growth in February and March compensating for a lackluster January.

“This growth is likely to continue alongside continued investor interest in for-sale properties—especially as investor demand anticipates future tenant demand for harder-hit assets such as office and retail,” the report notes.  In addition, smaller assets are coming online now more than ever, likely due to an increased supply of subleased properties.

Crexi analysts also note the well-documented trend of tenants reevaluating space needs as an increasing number of employees choose to continue working from home in some fashion, even as economies reopen.

“Tenant activity saw an impressive 56.42% climb from Q4 2020 to the first quarter of 2021,” the report states. “Organizations, seeing the light at the end of the pandemic tunnel, were empowered to move forward with their real estate decisions, with most activity focused on retail, industrial, and office needs.”

Retail tenant activity was up 56.3% over the quarter, while industrial tenant activity increased by 52.7% and office tenant activity was up 42.9%. Crexi analysts also observed a 56.7% increase in tenants contacting brokers for additional information on lease properties, which the firm says “indicates that more tenants are actively pursuing leasing a space rather than casually browsing what’s available.”