Five Open Doors: The Commercial Real Estate Investment Landscape in 2022

Many will remember the doom and gloom headlines that circulated just one year ago, when the commercial real estate investment space seemed to shoulder more than its fair share of economic burden. But before the turn of 2022, PwC and the Urban Land Institute released a report titled ‘Emerging Trends in Real Estate 2022.’
The report found a conclusive 84% of industry experts, observers and executives had a strong positive outlook for the sector this year. Only 1% of respondents judged the outlook for the coming year as abysmal or poor. This represents an almost full-circle change of heart. With a few months already under our belt, we can see how those predictions have started stacking up, and help investors continue to reconsider their portfolio architecture for the rest of the year.
commercial building open doors
Below are five key open doors I see for this next year of commercial real estate investing.

Making Multifamily Home

Multiple nods have come from the National Association of Realtors (NAR) regarding the continued strength of the demand in the multifamily sector.
Economists with the NAR point to the record high unit absorption and rent growth along with the low vacancy rates of this fourth quarter as positive signs for multifamily owners, landlords, and investors. Their new year outlook ventured a projection of a 10% rent growth average for multifamily units in the coming year. Last quarter, Tampa saw a year over year rent growth of 25%; the 10% expectation seems both promising and realistic.

Strength in Alternatives

The pandemic changed economy, lifestyle, and global aims in ways that couldn’t have been expected. For that reason, new luck has fallen on some of the alternative sectors, and investors who are open to alternative investing will be able to stand on firmer ground as more trends begin to take shape. Already, private investors have acted much faster in following the yield and placing their bets on alternative sectors.
Niche housing, particularly senior housing and skilled nursing facilities, is positioned to see great recovery and great returns in the coming year as the pandemic-related drop in occupancy quickly reverses. Specialty offices like medical and life sciences might see faster and more uniform return to office activity. These and other high-opportunity alternative sectors are expected to continue offering higher returns at lower prices, and logically, less risk.

The Dawn of Digital Real Estate

A simple Google search of the term ‘digital transformation’ will show skyrocketing levels over the past 18 months. With that global pivot comes a clear investor opportunity. 

server room datacenter

Digital real estate, including data centers, communications towers, and other infrastructure-related investment segments, are expected to only increase in their value. The demand for well-stored data, increased infrastructure and cell towers, and more digitally-empowered logistics facilities is high and only getting started. 

For investors looking for diversified returns in their portfolios, early establishment in this space seems particularly promising.

Self-Storage On The Rise

Self-storage real estate investments might be the quiet winners of the recent market. Closely tied to the action in the residential sector, the demand for storage has skyrocketed along with home purchases and home sales.
A report proved that Q3 earnings for the sector was an incredible 42% stronger than their pre-pandemic correlates. As many companies settle into a fully hybrid structure, employees are using their new-found freedom from office to explore different housing markets. And since the need for some home office space might not fully leave, there’s every reason to expect demand for self-storage to continue in its strength.

Community-Focused Investments Can’t Lose

Perhaps the most important, and needed, trends that are becoming evident in the commercial real estate sector relate to environmental, social, and governance (ESG) focused city planning.
Community-oriented investments are not only necessary, they’re also becoming some of the most profitable sources of return. Community members, government leaders, and industry executives alike are taking the pandemic-era warnings seriously, tightening their environmental standards and re-imagining the kinds of shared infrastructure that builds and determines a community.
Investors are placing higher emphasis on climate risk in their underwriting, and investing in projects—shared community centers, conscious land development, more green space, accessible financing—that enables community-wide projects. With newfound strength in community and a recovered aim in higher goals like effective climate action, those investments are seeing outsized returns in the recovery market.
Opportunity and reward in 2022’s commercial real estate market hasn’t been evenly distributed, but investors who are able to read the trends and weigh their portfolio for these higher-than-average returns will see incredible yield over the next three quarters. There are wide open doors of opportunity in multifamily, alternative, digital real estate, self-storage, and community-focused investing. With those five areas of focus, any investor—established or otherwise—has a great place to start or continue their recovery strategy.