By Bill Adams, MBA, CCIM, CRB, ALC
I have often said that my crystal ball is much clearer looking backward than forward. As we begin a new calendar year, I do feel like that 2022 will be another strong year for commercial real estate like 2021. Here are my predictions based on 40+ years of experience in the industry.
The big unknowns are the latest COVID-19 variant and whether Omicron is the last of the pandemic or just the latest in a series of mutations. Interest rates and inflation fears are the other unknowns.
My cloudy crystal ball predicts that COVID-19 will transition from a pandemic and will become endemic. Much like the seasonal flu, we will get a “jab” once a year. Wearing a mask in public or when sick will continue to be a habit for many of us.
Interest rates will rise this year as the Federal Reserve tries to tamp down inflation. My guess is that the inflation rate will begin to moderate later in the year as life adjusts to the new normal. I believe that wages and housing costs will keep the rate of inflation above the 2% rate we have enjoyed prior to the pandemic.
Home mortgage rates are projected to rise and Atlanta has an influx of potential buyers, which will make single family homes less affordable and drive rents in multifamily properties. While supply chain issues plague developers, there were still 21,000 multifamily units under construction at the end of 2021. The Atlanta multifamily sector will enjoy another good year in 2022.
The industrial market will continue to be strong as the city continues its role as the logistics hub for the Southeastern United States. Online shopping, a solid trend before the pandemic, will continue to drive the industrial market.
Despite the rise of the work-from-home movement, my guess is that the office market will have a good year. Many firms have delayed moving employees back to work because of the Omicron variant, but once we are past Omicron, I think many employees will return to the office for at least three days a week, if not more. Especially employees who are newer to the company who are getting used to the company culture, as well as upper management.
I do think we’ll see some reduction in office space and more hoteling – where when you want to go to the office, you’ll have to reserve a desk. Overall though, the office market will continue to recover in 2022.
Based on my observations during the holidays, the retail market ought to be solid this year. The one exception I’m worried about in the retail market is the restaurant business, which is challenging with the cost of food and finding labor. E-commerce will continue to be a challenge for brick-and-mortar retailers and successful retail outlets will incorporate online shopping into their mix.
Atlanta continues to be an attractive place to live, work and play. Population growth coupled with corporate relocations like Norfolk Southern, Microsoft and Google bode well for the Atlanta commercial real estate market in 2022 and beyond.
Prefer to hear my update instead of reading it? Click here for my 2022 commercial real estate forecast video!