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Just Released: Viewpoint 2022 Jan 6, 2022

Just Released: Viewpoint 2022

Integra’s Newly Released Viewpoint 2022 Report Highlights Challenges and Opportunities ahead for CRE

Annual Report Explores Key CRE trends, Outlook for U.S. Property Sectors and Specialty Reports for Auto dealerships, Golf Courses and Senior Housing

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DENVER, CO — (January 6, 2022) — Commercial real estate investors are facing a critical crossroads in 2022. That is one of the key themes highlighted in Integra Realty Resources’ (IRR) newly released Viewpoint 2022. Investors continue to find a myriad of choices across a spectrum of price points, risk-adjusted returns and geographic preferences. At the same time, investors need to tread carefully in a market where there is a convergence of complex issues, transformative change and lingering uncertainty—all of which creates potential risk for mis-pricing assets. 

Given this backdrop of challenges and opportunities, the 29th annual Viewpoint report provides a detailed overview of the commercial real estate market across five key property types: office, multifamily, retail, industrial and hospitality. Viewpoint 2022 also examines trends related to the economy, housing, capital markets, interest rates and employment, and explores how these issues will affect commercial real estate markets in the year ahead. Additionally, this year’s specialty property sector analysis covers the near-term outlook for auto dealerships, golf courses and senior housing.

“We are proud to bring this highly anticipated report back for its 29th year in production, as it’s an integral part of our clients’ annual business forecasting,” said Anthony M. Graziano, MAI, CRE, CEO of Integra Realty Resources. “The real estate market in 2021 was driven by plentiful capital availability, but it’s probably time to tap the brakes. We survived and thrived under a radical worldwide pandemic that isn’t over yet but will most certainly improve as immunity expands worldwide. There will continue to be major shifts in the employment base, and everything is going to continue to get more expensive, including debt. As we welcome the new year with strong balance sheets and good prospects, our challenge is to forge ahead confidently, but not recklessly.”

The report was produced in partnership with well-known veteran economist, Hugh F. Kelly, PhD, CRE, who added, “The perilous, twisting road travelled by Americans over the past two years brings us to a critical crossroads. A convergence of complex economic and social issues that include rising inflation, undersupply of housing and disruption in the workplace—all with COVID-19 continuing to overshadow the marketplace. Integra’s national survey amply shows a wide range of real estate choices that are sensitive to pricing parameters, appetite for risk/return, and geographic preferences.”

IRR Viewpoint 2022 Highlights

2022 National Themes

  • COVID-19 remains the single most significant economic problem facing the nation. The ripple effects of COVID-19 and its variants continue to be pervasive and significant with notable impacts on supply chain disruption, inflation and transformation of the workplace.
  • The economic recovery is moving closer to normalcy. The bounce-back in GDP growth that surged to 33.8% in 3Q 2020 was expected to moderate to 2% in 3Q 2021. Two percent growth was common pre-pandemic and represents the consensus forecast for the balance of the 2020s.
  • Both blue collar and white-collar jobs were so profoundly disrupted by COVID-19 that it seems inevitable the future will hold substantive change in the way work is performed, and employees are clearly in the driver’s seat. According to the Bureau of Labor Statistics Job Openings and Labor Turnover (JOLTS) November report, there were 10.4 million total job openings.
  • Inflation will remain a key issue in 2022 for consumers and investors. Both the housing market and the stock market are now priced in such a way that risk of a correction is inadequately reflected.
  • Imbalances in the for-sale housing market is setting the stage for volatility, not only in single-family sector in 2022, but also in the surging multifamily sector. Further complicating the picture is the lifting of eviction moratoria in both the ownership and rental housing sectors.
  • Liquidity supports a rebound in transaction volume, but rate risk will be an issue to watch in 2022. Interest rates have moved moderately upward in 2021, and most Fed watchers expect further tightening of rates in 2022.
  • The federal infrastructure spending bill approved in November will bring needed improvements and create a multiplier effect for commercial real estate. The $1 trillion invested over 10 years is a step in the right direction, but it is not a full solution. The amount of investment needed to get the country’s infrastructure to a “good” grade is more than $5 trillion.

Office

  • An “anchoring effect” is influencing buying and selling behavior, and the resulting widespread on bid and ask prices is constraining transaction volume.
  • Between 2015 and 2019, the annual transaction volume for office properties averaged $142 billion. Over the first three quarters of 2021, that volume was just $95 billion.
  • The top five markets based on YOY increase in transaction volume in 2021 are: Richmond, Milwaukee, San Jose, Miami/Dade County and Austin.
  • According to the Viewpoint Market Cycle Wheel, eight markets are in the Expansion phase, 15 in Recovery, 15 in Hypersupply and 21 in Recession.
  • 2022 Outlook: The anchoring phenomenon will continue to be a powerful force in the office market in the coming year.

Multifamily

  • Multifamily real estate is barreling into 2022 with enormous momentum. Transaction volume in the apartment sector surpassed all prior annual records based on year-to-date October 2021 numbers tracked by Real Capital Analytics (RCA).
  • The top five markets based on YOY increase in transaction volume in 2021 are: Tallahassee, Fort Myers, Miami/So Florida, Fort Collins and Sarasota. 
  • According to the Viewpoint Market Cycle Wheel, only one market is in Recession (Oakland), while 45 are in the Expansion phase, six in Recovery and seven in Hypersupply.
  • The initial household diaspora from city centers to suburbs and exurbs seen in 2020 ran out of steam in 2021. This is unsurprising as there has been a long-term deceleration of household migration in the U.S. dating back to the mid-1980s
  • 2022 Outlook: Multifamily inventory is poised for more growth in the coming year. Developers are responding to an environment marked by ample capital and strong renter demand by increasing production. Construction data from the Census Bureau as of August 2021 shows big jumps in year-over-year permitting activity at 52.7% and multifamily starts at 60.1%.

Retail

  • Retail sales activity remains subdued. According to RCA, transaction volume for 2021 through October was just $51 billion, less than half of the industrial sector and about one-fourth of the multifamily total.
  • The top five markets based on YOY increase in transaction volume in 2021 are: McAllen, Fresno, Sarasota, Hartford and Oklahoma City.
  • Hard-hit retail is showing a glimmer of optimism. Going-in cap rates, discount rates and reversionary cap rates for both Class A regional malls and community shopping centers are higher, on average, than the investment rates for CBD office, industrial and multifamily.
  • One-fourth of American retail property markets are in the Recession phase compared to half in the 2020 survey. Twenty-five markets are in Recovery, 16 in Expansion, 15 in Recession and three in Hypersupply.
  • 2022 Outlook: Although data on market rents and vacancy are mixed, the trends are no longer entirely dour. The coming year could present opportunities for selective contrarian investors to step in with acquisition capital when competitive pressures are limited.

Industrial

  • Our survey this year finds 90% of industrial markets in the Expansion phase of the cycle, 7% in Recovery, and just 3% in Hypersupply. Notably, not a single industrial market is rated as being in Recession.
  • RCA transaction data shows rising investment volume, descending capitalization rates and sharply increasing prices for industrial property assets.
  • The top five markets based on YOY increase in transaction volume in 2021 are: Polk County, Fla., Boulder, Eastern PA, Norfolk and St Louis.
  • Net absorption tracked by national brokerages reached record territory during 2021, with the potential to exceed 400 million square feet by year’s end
  • 2022 Outlook: Despite the remarkable run of success in the industrial sector, there are some potential warning signs to watch for in the coming year that could put a damper on demand for space, such as Fed rate hikes, lack of stimulus money to prop up consumer spending and a surge in pent-up demand that was largely exhausted in 2021.

Hospitality

  • STR and Tourism Economics is forecasting 2022 occupancy at 63.4% (+1.1%); ADR at $130 (+1.06%) and RevPAR at $82.00 (+1.17%).
  • Despite top line recovery, hotels are still struggling to return to profitability. STR/TE reported that when adjusted for inflation, RevPAR will likely remain below 2019 levels until at least 2025.
  • Most of the largest U.S. markets have performed worse than the U.S. average because these markets depend on business travelers, conventioneers and international guests.
  • Leisure demand is expected to boost performance in resort and remote areas; thereby skewing market statistics and the prognostication of a full recovery.
  • 2022 Outlook: Although the hotel market is project to continue to improve in 2022, the COVID Omicron variant has the potential to, once again, disrupt business and leisure travel and create a significant headwind for recovery in the hospitality sector. 

Specialty Property Reports

  • Auto Dealerships: The general view in the auto industry is that dealership franchises are currently being priced at record levels, with pricing levels expected to continue to increase. The price allocated to the real estate as part of the going concern acquisition appears to generally follow the same trend, though it is frequently constrained by the slower appreciation of underlying land value. Moving forward, real estate value trends are anticipated to continue an upward trend as transactional activity has accelerated.
  • Golf Courses: The future of golf appears to be bright, with renewed interest from both participants and investors. Profitable golf courses have sold on a 6x to 10x multiple, or a 10% to 14% cap rate. Headwinds remain, including an ongoing lack of financing, as well as the potential for increased labor costs as wages continue to increase. However, it appears that golf may have turned the corner towards a return to supply and demand equilibrium.
  • Senior Housing: The rebound in occupancy levels is expected to be substantial in most markets that are not seeing large increases in supply. The increased move-ins, coupled with higher inflation, should be enough to push rents and service fees higher than seen in the past decade, if not longer. Operating expenses are likely to increase beyond the 2.0% to 3.0% annual inflation levels that have been the norm for a number of years. However, NOI at most properties is expected to rise in the coming year. The big wild cards for valuation in 2022 will be interest rates and performance of the economy in general.

For more information about this year’s report, or to access additional IRR research, please visit www.IRR.com

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Locate an office

Each IRR office is led by an MAI-designated Senior Managing Director, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets.
Integra Offices Map Denver, CO Denver, CO 575 Union Blvd.
Suite 209
Lakewood, CO 80228
Phone: 720-833-5930
Fax: 303-951-1924
Boston, MA Boston, MA
Boston, MA 02210
Phone: 212-575-2935
Fax: 646-424-1869
Seattle, WA Seattle, WA 600 University Street
Suite 310
Seattle, WA 98101
Phone: 206-436-1179
Fax: 206-623-5731
Portland, OR Portland, OR
Portland, OR 97205
Phone: 212-575-2935
Fax: 646-424-1869
Boise, ID Boise, ID RiverWalk Center
1661 W. Shoreline Dr. Suite 200
Boise, ID 83702
Phone: 208-342-2500
Fax: 208-342-2220
Salt Lake City, UT Salt Lake City, UT 5107 South 900 East
Suite 200
Salt Lake City, UT 84117
Phone: 801-263-9700
Fax: 801-263-9709
Las Vegas, NV Las Vegas, NV 8367 West Flamingo Road
Suite 200
Las Vegas, NV 89147
Phone: 702-869-0442
Fax: 702-869-0955
Phoenix, AZ Phoenix, AZ 2999 N. 44th Street
Suite 512
Phoenix, AZ 85018
Phone: 602-266-5599
Fax: 602-266-1515
Sacramento, CA Sacramento, CA 590 Menlo Drive
Suite 1
Rocklin, CA 95765
Phone: 916-435-3883
Fax: 916-435-4774
San Francisco, CA San Francisco, CA 555 Meridian Avenue
Suite C
San Jose, CA 95126
Phone: 408-299-0444
Fax: 408-299-0449
Los Angeles, CA Los Angeles, CA 16030 Ventura Boulevard
Suite 620
Encino, CA 91436-4473
Phone: 818-290-5400
Fax: 818-290-5401
Orange County, CA Orange County, CA 2151 Michelson Drive
Suite 205
Irvine, CA 92612
Phone: 949-591-8150
San Diego, CA San Diego, CA Cornerstone Professional Center
2775 Via De La Valle, Suite 206
Del Mar, CA 92014
Phone: 858-259-4900
Fax: 858-259-4910
Miami, FL Miami, FL 9155 S. Dadeland Boulevard
Suite 1208
Miami, FL 33156
Phone: 305-670-0001
Fax: 305-670-2276
Naples, FL Naples, FL 2770 Horseshoe Drive S
Suite 3
Naples, FL 34104
Phone: 239-643-6888
Fax: 239-643-6871
Tampa, FL Tampa, FL 550 North Reo Street
Suite 220
Tampa, FL 33609
Phone: 813-287-1000
Fax: 813-281-0681
Orlando, FL Orlando, FL 326 North Magnolia Avenue
Orlando, FL 32801-2431
Phone: 407-843-3377
Fax: 407-841-3823
Jacksonville, FL Jacksonville, FL
Jacksonville, FL 32217
Phone: 212-575-2935
Fax: 646-424-1869
Charleston, SC Charleston, SC 11-C Isabella Street
Charleston, SC 29403
Phone: 843-718-2125
Fax: 843-718-2058
Atlanta, GA Atlanta, GA 5256 Peachtree Road
Suite 115
Atlanta, GA 30341
Phone: 404-924-6247
Fax: 404-418-4357
Birmingham, AL Birmingham, AL 880 Montclair Road
Suite 275
Birmingham, AL 35213
Phone: 205-949-5995
Fax: 205-271-2389
Jackson, MS Jackson, MS 617 Renaissance Way
Suite 100
Ridgeland, MS 39157
Phone: 212-575-2935
Fax: 646-424-1869
Dallas, TX Dallas, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-881-7191
Fax: 972-733-1403
Fort Worth, TX Fort Worth, TX 7080 Camp Bowie Boulevard
Fort Worth, TX 76116
Phone: 817-763-8000
Fax: 817-763-8017
Austin, TX Austin, TX 100 Congress Avenue
Suite 2000
Austin, TX 78701
Phone: 512-924-1345
Memphis, TN Memphis, TN
Memphis, TN 38120
Phone: 212-575-2935
Fax: 646-424-1869
Oklahoma City, OK Oklahoma City, OK 14 NE 13th Street
Suite 108
Oklahoma City, OK 73104
Phone: 405-422-0718
Kansas City, MO Kansas City, MO 1301 Oak Street
Suite 100B
Kansas City, MO 64106
Phone: 816-652-0222
Fax: 636-530-0046
Providence, RI Providence, RI 2 Charles Street
Suite B1
Providence, RI 02904
Phone: 401-273-7710
Fax: 401-273-7410
Syracuse, NY Syracuse, NY 812 State Fair Blvd.
Suite 1
Syracuse, NY 13209
Phone: 315-422-5577
Fax: 315-422-5295
Hartford, CT Hartford, CT 97 Broad Street
Middletown, CT 06457
Phone: 860-291-8997
Fax: 401-273-7410
New York, NY New York, NY
New York, NY 10036
Phone: 212-575-2935
Fax: 646-424-1869
Northern New Jersey Northern New Jersey 25A Vreeland Road
Suite 100
Florham Park, NJ 07932
Phone: 973-422-9800
Fax: 973-422-9797
Coastal New Jersey Coastal New Jersey 1415 Hooper Ave.
Suite 306
Toms River, NJ 08753
Phone: 732-244-7000
Fax: 732-505-9498
Philadelphia, PA Philadelphia, PA 1515 Market Street
Suite 800
Philadelphia, PA 19102
Phone: 610-238-0238
Wilmington, DE Wilmington, DE IRR-Corporate
Wilmington, DE 19805
Phone: 212-575-2935
Fax: 646-424-1869
Baltimore, MD Baltimore, MD
Washington, DC 20003
Phone: 212-575-2935
Fax: 646-424-1869
Washington, DC Washington, DC
Washington, DC 20003
Phone: 212-575-2935
Fax: 646-424-1869
Pittsburgh, PA Pittsburgh, PA 3535 Boulevard of the Allies
Pittsburgh, PA 15213
Phone: 412-683-2211
Fax: 412-683-2220
Cleveland, OH Cleveland, OH 850 Euclid Ave.
Suite 952
Cleveland, OH 44114
Phone: 330-659-3640
Fax: 330-659-3640
Columbus, OH Columbus, OH 6233 Riverside Drive
Suite 2N
Dublin, OH 43017
Phone: 614-764-8040
Fax: 614-764-8050
Saint Louis, MO Saint Louis, MO 16759 Main Street
Suite 209
St. Louis, MO 63040
Phone: 636-898-6533
Fax: 636-530-0046
Chicago, IL Chicago, IL 1 N Franklin St
Suite 3010
Chicago, IL 60606
Phone: 312-565-0977
Fax: 312-565-3436
Minneapolis, MN Minneapolis, MN 7301 Ohms Lane
Suite 190
Minneapolis, MN 55439
Phone: 612-339-7700
Fax: 612-339-7937
Nashville, TN Nashville, TN 1894 General George Patton Drive
Suite 300
Franklin, TN 37067
Phone: 615-628-8275
Fax: 615-628-8286
Richmond, VA Richmond, VA 7110 Forest Avenue
Suite 202
Richmond, VA 23226
Phone: 804-346-2600
Fax: 804-747-9140
Greensboro, NC Greensboro, NC 5411-A Friendly Avenue
Greensboro, NC 27410
Phone: 336-676-6033
Fax: 336-676-6025
Raleigh, NC Raleigh, NC 8382 Six Forks Road
Suite 200
Raleigh, NC 27615
Phone: 919-847-1717
Fax: 919-847-1714
Charlotte, NC Charlotte, NC 214 W. Tremont Ave.
Suite 200
Charlotte, NC 28203
Phone: 704-376-0295
Fax: 704-342-3704
Columbia, SC Columbia, SC 141 Riverchase Way
Lexington, SC 29072
Phone: 803-772-8282
Fax: 803-772-0087
Cincinnati/Dayton, OH Cincinnati/Dayton, OH 8241 Cornell Road
Suite 210
Cincinnati, OH 45249
Phone: 513-561-2305
Fax: 513-561-2881
Detroit, MI Detroit, MI 400 W. Maple Road
Suite 100
Birmingham, MI 48009
Phone: 248-540-0040
Fax: 248-540-8239
Indianapolis, IN Indianapolis, IN 4981 North Franklin Road
Indianapolis, IN 46226
Phone: 317-546-4720
Fax: 317-546-1407
Louisville, KY Louisville, KY 13000 Equity Place
Suite 105
Louisville, KY 40223-3976
Phone: 502-452-1543
Fax: 502-451-3657
Caribbean Caribbean Cayman Business Park #A5, P.O. Box 751
Grand Cayman, Cayman islands
Camana Bay, KY KY1-9006
Phone: 844-952-7304
Houston, TX Houston, TX 9225 Katy Freeway
Suite 206
Houston, TX 77024
Phone: 713-973-0212
Fax: 713-973-2028
San Antonio, TX San Antonio, TX 10010 San Pedro Avenue
Suite 220
San Antonio, TX 78216
Phone: 210-446-4444
Puerto Rico Puerto Rico Vig Tower 1225 Ave Ponce De Leon
Suite MZ-4
San Juan, PR 00907-3907
Phone: 844-952-7304
New Orleans, LA New Orleans, LA
New Orleans, LA 70130
Phone: 212-575-2935
Fax: 646-424-1869
Little Rock, AR Little Rock, AR
Little Rock, AR 72223
Phone: 212-575-2935
Fax: 646-424-1869
Grand Rapids, MI Grand Rapids, MI 1009 44th Street, SW
Suite 107
Grand Rapids, MI 49509
Phone: 616-261-5000
Fax: 616-261-5045
Lubbock, TX Lubbock, TX 6309 Indiana Avenue
Suite D
Lubbock, TX 79413
Phone: 806-368-8063
Rio Grande Valley Rio Grande Valley 1601 West Trenton
Suite L108
Edinburg, TX 78539
Phone: 956-878-3577
Northwest Arkansas Northwest Arkansas
Fayetteville, AR 72701
Phone: 212-575-2935
Fax: 646-424-1869