The COVID-19 pandemic had a major impact on nearly every aspect of American life. Even now, more than three and a half years removed from the initial lockdowns, those effects are still being felt.
This is certainly true in the world of commercial real estate. Many who are invested in a commercial structure in one way, or another might be wondering if things have “gone back to normal.” There’s no easy answer to that question. It seems increasingly clear that there’s a new normal and that things are still evolving in the wake of the pandemic. Here’s a brief dive into the current state of commercial real estate:
A Short-Lived Boom
As would be expected, commercial real estate experienced a slowdown through much of 2020 amid uncertainty regarding the pandemic. But it picked up later that year and experienced a boom through early 2022. Prices rose more than 80% in that time and sales rose nearly 30%. But things began to turn in the middle of last year. In the second half of 2022, commercial real estate prices dropped by more than 40%. So far, there are not many indications of a major bounce back in 2023.
Interest Rates
One of the major contributing factors to this commercial real estate slowdown has been the Federal Reserve’s 11 interest rate hikes over the past 18 months. These increases making borrowing money more expensive across the board, thus making it more expensive to complete a commercial construction project.
Industry-Related Variance
Not every segment of the commercial real estate sector is suffering, however. For example, warehousing and logistics have seen consistent growth amid the continued rise of e-commerce. Vacancy rates for warehouses are low, prices are high, and demand is growing. Multi-family housing development has also been robust as demand continues to increase amid rising mortgage rates for single-family homes.
On the other hand, the retail and office space sectors have struggled. Because of a post-COVID decrease in foot traffic and the long-term rise of e-commerce, retail real estate has seen very little growth. Meanwhile, the rise of work-from-home means that millions of square footage of office space across the country is currently vacant.
If you own a commercial structure and are wondering about its current value, Atlas Valuation is the place to call in and around Auburn, Alabama. Our experienced appraisers will give you an accurate assessment of the value of your property no matter what industry you’re in. Call us at 334-737-6993 to get started today!
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