Industrial Topped CRE Sectors Last Year New Index Reveals
But there are many other key issues and opportunities unique to specific markets, Newmark says.
Industrial topped CRE sectors in 2020, according to the just-released Newmark Opportunity Index.
“Largely a result of the growth of e-commerce and the shutdown of brick-and-mortar retail, the industrial market fared better than any other sector during the pandemic, with demand and rents for industrial space on the rise, and an uptick in industrial sales volume,” the report said.
The trends were seen broadly across US metros, most pronounced in the top industrial markets, including Boston, Atlanta, Philadelphia, Tampa and Dallas.
On the downside, office space fared the worst of CRE segments last year as a result of the increase in remote work during the pandemic and the uncertain timeline for some tenants’ return to the office.
Nationally, office vacancies climbed to 15.8% in the first quarter of 2021 from 13% a year earlier.
The higher vacancies saw many office owners offering substantial concessions, thereby reducing effective rents, Newmark reported.
The top ranked markets for office investment opportunities include Tampa, Miami, Dallas, Minneapolis and Philadelphia.
Looking at the recovery from the pandemic, Newmark said the multifamily asset class is rebounding and offers significant investment potential in many markets, an opportunity which is underscored by the high prices of single-family homes.
The hospitality sector, which suffered significantly last year, is rebounding as well with hotel occupancies having reached 54.6% by March 2021, a full 1,600 basis points above the early-pandemic trough.
Another sector hurt hard by the pandemic, brick-and-mortar retail, has started to come back as metro areas that implemented fewer pandemic-related restrictions on gatherings tended to outperform larger markets. Top-ranked retail markets include Nashville, Houston, Tampa, Orlando and Dallas.
“While some of the macro challenges facing the CRE space—the speed at which workers return to the office, consumers’ increased proclivity for e-commerce—are seen across the country, many other key issues and opportunities are unique to specific markets,” said Jimmy Hinton, Newmark EVP and head of Investor Strategies.