Office: Vacancies Expected to Increase in 2021
February 15, 2021 • Covid has impacted the retail, residential, office and industrial sectors differently. As we move slowly toward a ‘new normal,’ here’s a snapshot of what we’re seeing in each of these markets.
According to a recent report by Moody’s Analytics, office vacancy rates throughout the country will likely increase throughout 2021 and into 2022, when the national vacancy rate is expected to peak at just under 20%. As was the case with the timing of the full impact of the Great Recession, the full impact of the pandemic — and the transition to WFH (work from home) — wasn’t felt in 2020, but will be felt in 2021, when office occupancy rates and rents are expected decline most significantly. In 2020 asking rents for office space actually increased by 0.4% for the year, notwithstanding a 0.6% decrease in the fourth quarter and Moody’s predicts a 4.9% to 7.4% decline in 2021 office rents. Learn more
Retail: Top-Tier Malls: Alive But Challenged
According to a recent report by real estate analytics firm Green Street, the value of A-rated malls in the U.S. has declined by about 45% after peaking in 2016 following the downturn of the Great Recession. Although the decline in the value A-rated malls is emblematic of the challenges currently faced by brick-and-mortar retail generally, for enclosed malls, according to Green Street, the biggest risk factor is obsolete anchors, namely department stores. It estimates that 360 mall-based department stores have closed since 2016 and forecasts that half of the remaining stores will close by the end of 2025. The departure of these anchors could be the harbinger of good things to come if mall owners are able replace them with strong retailers that attract consumers. Learn more
Residential: Demand Strengthens for Master-Planned Communities
According to RCLCO’s 2020 Top-Selling Master-Planned Communities Report, demand strengthened in 2020 for new homes in master planned communities. The report attributes this to the COVID-induced acceleration of long term trends, including the uptick in millennial household formation, historically low interest rates and low levels of resale inventory. The 50 top-selling communities experienced a 20% increase in total sales in 2020 as compared to 2019. Florida and Texas accounted for 63% of total sales among the top-selling communities. Three of the top five locations were based in Florida, while the top-selling metropolitan area was Houston/The Woodlands/Sugar Land, TX, with eight communities in the top 50 and over 5,000 homes sold. Learn more
Industrial: 2020 Was a Record-Breaking Year
According to JLL, the 2020 performance of the U.S. industrial real estate sector set new records. Overall, industrial leasing activity increased by almost 27% from 2019, with e-commerce being the primary driver of demand. Rental rates increased by 4.2% over 2019 levels to $6.39 per square foot and 327.2 million square feet of additional industrial space was delivered in 2020, surpassing 2019 by 52.7 million square feet. Vacancy rates remained below 6% on average throughout the year, ranging from a low of 1.9% in New York City to a high of 10.5% in Charleston. Learn more
Join Ellen Sinreich and ICSC for Reinventing the Mall
Please join Ellen Sinreich, founder of ICSC’s Legal Forum, and an esteemed panel of speakers for the Legal Forum’s upcoming Webinar: Reinventing the Mall. Ellen will moderate a panel of landlord and tenant representatives who will discuss the challenges and opportunities presented by this intriguing possibility and what they expect in 2021 and beyond. Learn more