How The Pandemic Really Impacted CRE Asset Classes


In just two years, we went from a very bleak, uncertain future to a comparatively stable positive outlook.

Just two years ago, more than 20 million people lost their jobs at the onset of the COVID pandemic. Companies were scrambling to transition their workforces to remote work, toilet paper was in relentlessly short supply, and the outlook for in-person businesses was bleak at best.

Now, people are going back to the office – and into gyms, movie theaters, restaurants, and pretty much everywhere else. And that bodes well for certain CRE asset classes more than others, according to Marcus & Millichap’s John Chang. The US has replaced 95% of the jobs lost at the pandemic’s onset and Chang predicts a return to pre pandemic levels this summer. Retail sales are also 27% higher than pre-pandemic levels, while household savings are at an all-time high.

“In just two years, we went from a very bleak, uncertain future to a comparatively stable positive outlook,” Chang says. “Yes, there’s a bunch of noise about inflation, interest rates, and the possibility of a recession, but the momentum is very positive.”

For CRE, “we’re in one of the most interesting phases of the cycle,” Chang says. “Each property type faces its own unique reality and its own unique opportunities.” 

Industrial properties were basically unscathed by the pandemic, with vacancies at an all-time low and demand high.  Apartment vacancy rates are also at a historic low, and while self-storage demand took a hit, it also then surged, with vacancy also near all-time lows.  

Meanwhile, retail had a “split reality” as sit down restaurants and experiential retail were hit hard and struggling chains closed – but necessity retail like grocery stores thrived and overall vacancy rates are pushing back toward pre-COVID levels.

Hotels “took it on the chin” but are making a strong recovery, and Chang says he predicts a strong occupancy rate recovery this summer. Seniors housing will face a lengthy recovery cycle as the industry adapts to a new operating climate post-pandemic, and finally, there’s office. Chang says we should see strengthening space demand as restrictions loosen and people return to work.

“We’re not completely out of this yet but the momentum has shifted to the positive,” Chang says.

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