Market Report | AREA Real Estate Advisors

AREA looks back over the 2nd half of 2020 with a breakdown of the impact of the pandemic on the commercial real estate markets and the economy, as well as looking to the future and what is expected in 2021.

With input from our senior leadership, our brokers and our analysts, we aim to provide you with the most relevant and recent info including notable deals and important trends in the economy and in the commercial real estate markets.

MULTIFAMILY MARKET: The pandemic slowed multifamily investment activity in 2020. The outlook remains bullish as investor demand for KC metro area multifamily assets remains strong. As the recovery continues, aided by ultra-low interest rates, expect an uptick in transactions in 2021. With a recovering economy and strong demand, market fundamentals will remain steady.

RETAIL MARKET: All brick and mortar retailers and restaurants have been forced to adapt to the changing consumer environment that was forced on by the pandemic. Retailers will continue to balance and incorporate an omni-channel approach to support online shopping demands.

ECONOMIC REVIEW: The pandemic pushed the U.S. economy to the brink in the spring of 2020 with record job losses and total economic disruption. However, with trillions in fiscal aid from Congress and the Fed anchoring interest rates near zero, the economy held on and began to recover as lockdowns lifted. Vaccine breakthroughs and a sooner than expected rollout, bring hope that the economy will recover at a faster clip in the 2nd half of the year.

AREA looks back over the third quarter of 2020 as we breakdown the impact of the economy opening up again and the commercial real estate markets.

With input from our senior leadership, our brokers and our analysts, we aim to provide you with the most relevant and recent info including notable deals and important trends in the economy and in the commercial real estate markets.

RETAIL MARKET: Retail continues to take the brunt of economic fallout from pandemic and lockdown. Leasing and sales volume are down compared to pre-pandemic levels but there are positive signs that segments of retail market can survive and thrive during the pandemic. Large retailers are weathering the storm and continued shift to e-commerce and distribution outside of traditional avenues will help offset losses. Rent growth expected to turn negative in 2021 before rebounding and sales volume is down about 50% YOY. We expect a strong rebound for retail once pandemic has passed.

MULTIFAMILY MARKET: Sales volume is down from pre-pandemic levels as investors paused during lockdown and mostly stayed on the sidelines looking for clarity in capital markets. Deals are getting done but at a slower pace and we expect volume to increase later in 2021 with Fed anchoring rates near zero and liquidity in capital markets remaining high. Vacancy rates have increased approx. 95 bps YOY, and we expect vacancy rates to gradually increase but remain rangebound for next few years. Despite slowdown in sales activity, market fundamentals are better than expected and we see this market weathering the pandemic with activity picking up later in 2021.

OFFICE MARKET: This sector tends to respond more slowly to abrupt changes in economy. The office market is showing signs of short-term weakness from the pandemic as space is coming back to the market with vacant square feet up 23% YOY and sublease space up 53% YOY. Vacancy rate is about 8.5% YTD, an increase of 140 bps YOY. While there is short-term weakness in the market and both leasing and sales activity are down, we expect activity to increase in 2^nd half of 2021. Office users will have more clarity by then and we see office tenants looking to make leasing decisions they are currently putting off. The office market will see tick up in activity as office users look to increase or decrease space depending on needs as well as many reimagining office designs for the future.

AREA looks back over the first half of 2020 as we breakdown the impact of the pandemic and the economic shutdown on the economy and the commercial real estate markets.

With input from our senior leadership, our brokers and our analysts, we aim to provide you with the most relevant and recent info including notable deals and important trends in the economy and in the commercial real estate markets.