The Many Ways Back To School Will Deliver a Boost to CRE

The return of students to classrooms this fall will spur commercial real estate, says Marcus & Millichap in a mid-year report.

The firm says there will be a surge in hospitality, retail, and education-related job creation by the two million workers who have left the workforce to take care of children during the pandemic as primary schools come back into session and child-care tax credits reach parents.  The return of pupils to college towns and major metro submarkets that house universities will also deliver a boost.

Retail CRE will benefit from back-to-school this fall as the amount parents spend per child is slated to reach a new high this fall on items from apparel to tech, Marcus & Millichap notes. “In anticipation, brick-and-mortar stores and online vendors will bolster inventories this summer, driving import volumes and demand for warehouse space….. By expanding inventories some of these industrial tenants’ will exceed their current storage capabilities, driving demand for available warehouse and distribution space prior to the holiday months.”

Surveys indicating shoppers expect to spend more per child this year and are eager to return to physical stores suggest apparel and department stores, retail segments that each recorded encouraging sales growth in June, are positioned to receive a financial boost as parents update their children’s wardrobes and purchase school supplies and college room décor, the analysts who wrote the study contend.

Apartments adjacent to universities and patronage at restaurants, bars and hotels that were hard hit by the health crisis will be helped by the re-introduction of major student populations, the report says. Those apartments suffered during the pandemic as the high number of college students who moved back with parents or relatives lifted subsector vacancy 110 basis points to its highest point in nearly seven years, according to the study.

But with the reopening of campuses during the second quarter of 2021, unit availability in the rental segment declined 160 basis points to 3.7%, the lowest rate since at least 2013 while a nearly 7% boost in effective rent that lifted the average monthly rate to a record $1,642, the firm says.

Hospitality CRE in college towns will also be helped by the return of attendees to sporting events, note the authors, as restaurants and hotels regain the benefit of full-capacity football games and other NCAA sports this season.

A sector Marcus & Millichap sees as getting a mixed-bag from the return of students to K-12 and college is self-storage

Primary and secondary schools’ plans to resume full, in-person learning this fall will reduce the amount of space students require at home for studying, freeing up rooms for alternative uses and reducing demand for self-storage, according to the report.

Yet, demand in the sector is expected to be helped as the opening of offices will again prompt people to move for work, a life choice that often requires usage of a storage unit.