The Azucena Take: Investor Outlook on the Value of Commercial Real Estate in 2021

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This month, Marcus & Millichap partnered with Wealth Management Real Estate to conduct the Investment Sentiment Survey. This was to get an understanding of how confident investors are about commercial properties. Participants were asked to give feedback on what they expect the value of the property in their portfolio to be in the next 12 months.

The data collected has been broken down into three groups of investor outlooks. They are Momentum Investments, Recovery Investments, and Uncertain Investments.

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Momentum Investments

Momentum Investments are properties that sustained momentum during the pandemic as defined by there high rent collection and low vacancy. The properties that fall into this category are industrial, self-storage and apartments. Here are the findings from the survey:

  • 72% of industrial owners, 71% of self-storage owners and 64% apartment owners expect the value of their property to rise in 2021.

  • Industrial had the largest outlook with an 8.2% average increase.

  • Self-storage is expected to have a 6.5% average increase.

  • Apartment owners anticpate a 5.2% gain.

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Recovery Investments

Recovery Investments are properties that took a hit during the pandemic but are expected to recover in 2021. The properties that fall into this category are hotels and senior housing. Here are the findings from the survey:

  • 59% of investors expect the value of senior housing to rise with an average gain of 6.7%.

  • 47% of investors expect the value of hotel properties to rise with an average gain of 4.3%.

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Uncertain Investments

Uncertain Investments are properties that took a big hit during the pandemic and investors are unsure of its value. The properties that fall into this category are retail and offices. Here are the findings from the survey:

  • Most of the uncertainty with retail property is based on a number of factors including location and age.

  • Retailers that sell essential goods or cater to a niche market have not been economically hurt by the pandemic.

  • Only 30% of investors believe retail property will increase in value with many expecting a price drop of 2.8%.

  • The uncertainty with offices is in regards to the future of work from home policies.

  • Only 27% of investors believe offices will increase in value with many expecting a price drop of 2.7%.

The survey showcases a growing sense of optimism that investors have for 2021. As the number of cases drop and communities begin to reopen, investors are already starting to prepare for a post-pandemic economy.

Investors are already looking to the future, the big question is will you be ready to invest?

Carlos Azucena