Commercial property, like all forms of real estate, is a regional industry heavily influenced by local factors. A commercial facility in one area may perform much better than a similar facility in a town just down the highway.
However, we can say that commercial property as a whole seems poised as a stable, reliable investment in 2022. If you can select the right type (more on that below) and find a good deal on a quality investment, commercial property in 2022 seems like a great way to diversify a real-estate portfolio.
Investor Outlook: Commercial Property in 2022
Note: This article is for general information and entertainment only and should not be considered investment advice of any kind. Investing in commercial property creates significant risk and you should always speak with a professional expert before making any decision.
What’s the Best Type of Commercial Property for 2022?
Investing in commercial property brings a variety of choices. Not just how much you want to spend and where you want to purchase, but also what type of commercial real estate you want to buy.
For commercial property in 2022, it seems likely that a few different types of properties will generally have the best chances of bringing high demand with low vacancy rates.
With the rise of online shopping, it appears that warehousing could be a stable asset in 2022 and beyond. Online retailers, including large tech companies and small businesses, need places to store their products, as well as facilities that allow for seamless shipping. Property owners who can provide these spaces will likely find high demand.
If current trends continue, industrial space will also be in demand. According to the Economic and Commercial Real Estate Outlook for 2021 and 2022 by the chief economist at the National Association of Realtors, industrial space had the lowest vacancy rates among four key property types. (See p.25). Industrial space had low vacancy rates before the pandemic and never rose above 5.1%.
Undeveloped Land Could be More Attractive…If Prices Decline or Slow
As an investor, it may be possible to turn undeveloped land into profitable commercial real estate, but much depends on the availability and pricing of building material. However, if the cost of materials begins to steady itself, the market could see a high potential for undeveloped land.
What Commercial Properties Should Be Avoided?
While some commercial-property types may be profitable, others seem less attractive for 2022. Above all, it seems that office space is seeing the biggest declines. With people working from home, companies going to partial in-office days, and many professionals starting in-home businesses, the need for large-scale and even medium-scale office space has significantly declined.
Again, this is a trend that began well before the pandemic, but has only increased since early 2020. According to the NAR report, vacancy in office space was above 12% in the first quarter of 2019, but rose to 16.4% in the first quarter of 2021. As businesses return to “normal,” there may be a slight recovery for office space, but many have realized that working from home isn’t so bad; many companies have found that mobile and out-of-office employees, when managed properly, can be a useful option. Numerous business will stick with full or partial out-of-office work, continuing the low demand for office space.
Competition for Commercial Property Could Actually be Higher
Overall, it seems that commercial property will be a useful and stable asset in 2022. Having commercial property in 2022 could bring a steady income (assuming you have the right type) while allowing you to hold an asset that is gaining value.
However, competition for commercial property could be fierce, as more investors will see that that this type of real estate is a great way to boost and diversify an investment portfolio. This could mean that the overall price of commercial real estate could rise in 2022, and bidding wars over desirable properties could be commonplace.
If you plan on investing in commercial property in 2022, you need to give yourself every competitive and purchasing advantage possible. This means, among other things, having an investment loan ready to launch as quickly as possible. Dedicated investors will want to meet with lending professionals and get pre-approved for a loan so that the legwork is all but complete when it’s time to negotiate a purchase.
Supply Chain and Worker Shortage Could Reduce Demand
Overall, it seems that commercial properties could be a wonderful addition to your portfolio in 2022. However, the success of commercial facilities is dependent on the success of businesses. If businesses are struggling, your commercial real estate could sit empty or not fetch the high monthly prices you were expecting.
Two factors, both deeply connected to each other, could impact the commercial property in 2022 and the following years: disruptions in the supply chain and a shortage of workers. These are, according to some experts, the major factors currently holding back the national economy. If we can’t create solutions to this issue, it stands to reason that business won’t be able to grow, which means demand for your space may be limited.
This is true even for property types that are expected to be strong in 2022. Industrial space, for example, has low vacancy rates, making it a solid investment. But if manufacturers can’t get supplies and continue to struggle finding workers, they won’t be able to expand into new facilities; they may even need to downsize.
The supply chain and worker shortage, if nothing else, is something to keep an eye on when investing in commercial property in 2022.
Find the Investment Property You Need for Commercial Real Estate
If you are ready to invest in commercial property in 2022, contact our team today. We’ll help you get pre-approved or pre-qualified for an affordable loan so you can move quickly on the right property for you future!