Outlook for the Real Estate Market in 2021: Commercial Real Estate Is Catching Up

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The much-awaited light at the end of the tunnel shines gradually to shine brighter. With the end of the coronavirus lockdowns, almost all economic indicators turned positive again and the economic activities have picked up speed again. Although the delta variant is likely to cause the fourth wave of infections, it seems that with a high vaccination rate, living and working with the virus seems possible.

Current buyers and sellers are still cautious, especially considering the future of the office as a place of work, the function of the city center as a central place for physical shopping, and the role of sustainability criteria in relation to real estate value development. General political, economic, and social uncertainties result in investment uncertainties. This is true across the globe.

Zillow's rental index for the 12 largest metro areas in the US by population showed that U.S. central business district (CBD) and top 10% of zip codes by population density saw more than a 10% drop in rents, confirming that demand for real estate in dense city centers has actually fallen.

Rental index for 2020 and 2021


Note: 1 February 2020 = 100.












Brick-and-mortar retail struggles the most

According to the German trade association HDE, for example, sales in traditional retail fell by ten percent from March to May of this year, while online sales, on the other hand, turned over 20 percent more. 

retail commercial real estate

“That hits the stationary retail trade to the core and we can already imagine that we will see more bankruptcies in the coming year," states Wolfgang Köbler from KSW Vermögensverwaltung. "That's why I expect falling prices and yields for retail properties."

The office space market experiences a dip

The office market is also affected. According to the data provider Statista, 61 percent of people worked in the office before coronavirus and only 39 percent at home at times. Now the relationship has been reversed and 80 percent of the jobs could be home offices. 

This model will catch on. On the one hand, many employees have come to appreciate the advantages of the home office, on the other hand, the companies see that it works and that they save costs at the same time.

office commercial real estate

In the long term, the demand for office space will decline, which would have a negative impact on this segment. Wolfgang Köbler also agrees with this. "We are not yet seeing any falling prices due to the home office trend. I also do not believe that there will be a massive slump as some experts are predicting," he says. 

The residential property market is recovering

On the other hand, the experts are somewhat more optimistic about residential real estate. “Of course, the low-interest rate level supports the market for residential real estate,” says Köbler. He also points out that, especially in metropolises, demand still exceeds supply. 

"We are …

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