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Investors Push Commercial Sales to Pre-Pandemic Levels

It appears the pandemic is over, at least for commercial real estate. But the rebound isn’t even, with city-to-city and commercial segment-to-segment differences.

NEW YORK – Investors are swooping back into commercial real estate, sending sales volume this year back to pre-pandemic levels. Low interest rates are also helping to drive the renewed interest, as is investors’ optimism that the worst of the pandemic may be over, The Wall Street Journal reports.

But the commercial sector has changed compared with pre-pandemic days: Sunbelt cities posted record sales, suburban offices appear to be more favored than downtown locations, and demand has soared for warehouses and office buildings that cater to pharmaceutical and biotechnology industries.

“There is a move to both new property types and new markets,” Real Capital Analytics, a data and research firm, wrote in a recent report.

Investors purchased $144.7 billion of U.S. commercial property in the second quarter – 14% higher than volume in the second quarters from 2015 to 2019, according to Real Capital Analytics.

Investors are bullish on certain types of commercial properties, such as life-sciences office buildings and rental apartments. LaSalle Investment Management has spent $1.9 billion on U.S. real estate investments this year, up from $202 million in the first half of 2020 and from $1 billion in the first half of 2019.

The markets seeing some of the biggest increases in commercial real estate have also seen some of the largest influxes to their populations during the pandemic. Real Capital reports record high first-half volumes in Dallas; Atlanta; Phoenix; Austin, Texas; Tampa, Fla.; Nashville, Tenn.; and San Antonio.

But the commercial real estate market is not recovering in every sector. For example, tenant demand decreased in malls and office buildings during the pandemic. Also, the growth of remote work continues to reduce demand for office buildings.

Source: “Commercial-Property Sales Volume Returns to Pre-Pandemic Levels,” The Wall Street Journal (July 27, 2021) [Log-in required.] and “U.S. Market Rebounds to Pre-Pandemic Activity Levels in Q2,” Real Capital Analytics (July 21, 2021)

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