The Azucena Take: Investors Expect a Solid Recovery in 2021

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When the pandemic first hit, it radically transformed the entire economic landscape of the country. Commercial real estate was among the hardest hit with shops closing, business implementing work from home policies and investors unsure of the future. With light at the end of the tunnel, there is now a renewed confidence and many will be looking to invest in commercial real estate.

Six months ago, Marcus & Millichap had an Investment Sentiment Survey to get an understanding of how confident investors were about the state of the economy. A second survey was conducted last month and the results show a massive shift.

Here is a quick breakdown of the key findings in the survey.

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  • Containing the pandemic is still a top concern but it went from the #1 concern to the #2 concern.

  • The state of the economy, high unemployment and high vacancy is still a major concern among investors. However the concern for these issues has dropped.

  • Rising interest rates are now a major concern compared to August (going from 15% to 41%).

  • Changes in the tax law was the #5 concern among investors in August 2020. It’s now the #1 concern among investors.

  • The Investment Sentiment Index was at 166 in February 2020 but dropped to 140 in August. It has now bounced back to 165 as of February 2021.

Overall this shows that investors are looking to invest in a post-pandemic economy. While commercial real estate has always been desired by investors, not all property is going to receive the same amount of attention. The survey also looked at what types of property investors are looking at and what they look like on the market.

Here is a quick breakdown of the key findings in the survey.

Investors are optimistic about the appreciation of industrial, self-storage and apartments while seeing a strong recovery for senior housing and hotels. There is however a little uncertainty about the future of retail and office space.

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  • Industrial and apartments are more favored to buy when it comes to a buy vs. sell sentiment.

  • There is almost no interest in selling of senior housing.

  • There is very little interest in selling but a lot of interest in buying hotels and office space.

  • While there is little interest in buying there is more of a desire to sell self-storage and retail property.

  • The success of retail has been mixed based on the location. Some have experienced an economic success while others are struggling.

  • It’s also anticipated that investors will have an easier time buying new commercial property at a more discounted price.

Given how much investor confidence has skyrocketed in only 6 months, there are many reasons to be optimistic about the future. As the number of Americans being vaccinated rises, investors are looking to be prepared for a post-pandemic economy.

The big question now is will you want to invest in a post-pandemic economy?

Carlos Azucena