Commercial Real Estate Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The commercial real estate market is expected to register a CAGR of more than 10% during the forecast period.

COVID-19 pandemic severely affected the commercial real estate sector, as travel restrictions and social distancing affected the public mobilization, commercial works, and gathering facilities. The office sector, retail sector, and hospitality sector are the most affected market segments during the pandemic. Furthermore, now the global market is in the recovery phase, as COVID-19 protocols are relaxed, and the sales are reaching pre-pandemic levels in the market.

The significant growth in the commercial real estate market is leveraged by urbanization, digitalization of the commercial sector, and increasing foreign investments into the sector. For instance, in 2021, foreign investments in the European commercial real estate market accounted for half of the capital investments in that region, which is almost EURO 130 million.

Moreover, China and Canada experienced growth in office space absorption, whereas Europe and the United States saw declined rate. In addition, Asia-Pacific is leading in terms of retail sales and logistics warehouse absorption in the global market.

Key Market Trends

Office Markets to Witness Increased Growth

The office market had a strong hit by the pandemic globally. Despite the huge disruption, now the market is in the recovery phase. Furthermore, increasing investments into the sector are boosting the economic recovery in the market.

In 2021, office occupancy experienced robust growth of more than 80% in almost 390 metro cities across the world. Moreover, 30 million square feet (msf) of office space has been absorbed since the third quarter of 2021. Meanwhile, rental growth of the sector is in the slow recovery phase, and EMEA experienced significant growth in rental growth.

In addition, most of the office space is absorbed by Class-A offices with more than 61%, followed by Class-B and Class-C offices with 32% and 7%, respectively.

Furthermore, the Asia-Pacific (APAC) region is leading in the office market due to population growth, GDP growth, middle-class consumers, and the working-age population leveraging the office demand. Also, the APAC region contributes more than 50% of office construction in the global market.

The Retail Sector is Likely to Witness a Significant Growth

Despite the COVID-19 pandemic disruption, the retail real estate sector saw a significant growth which is leveraged by the digitization of work, the transformation of physical retail, and the shift towards environmental, social, and governance (ESG) considerations. Moreover, the retail sector is facing many challenges from the e-commerce sector and changing customer behavior during the pandemic. Despite these challenges, the sector stood resilient, as the e-commerce sales during the pandemic accounted for only 14% compared to overall retail sales.

Moreover, to meet consumer demand and adapt to the changing retail environment, developers are focusing on different strategies. Such as remodeling shopping centers to serve multiple purposes, customizing tenant mix, and developing new lease models to attract the latest business models.

In addition, to meet the consumer demand, some retailers are expanding their business through omnichannel strategies, such as click-and-collect, curbside pickup, and ship-from-store by adopting new technologies.

Furthermore, the retail sales increased in the Asia-Pacific region, followed by the United States and Europe. Also, retail sales experienced growth in different segments such as in-store retails, grocery stores, apparel, departmental stores, restaurants, and bars.

Competitive Landscape

The global commercial real estate market is highly competitive and fragmented, with many players. Most of the players are expanding their business by investing strategically in partnerships, acquisitions, etc. The office sector, retail sector, and logistic sector are the most invested segments in the market. Furthermore, the investments into the market are driven by robust office space take-up, declining vacancy levels, and rising rentals despite the disruption caused by the pandemic. Some of the major companies are Brookfield Asset Management Inc., Prologis Inc., Boston Properties Inc., WANDA Group, etc.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

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