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Profimex Market Review Update – March 10, 2021

10.3.2021

Global Investors Back Away from Office

The top 100 global investors added $65.4 billion of commercial real estate assets to their portfolio last year – a 22% decline from the $83.7 billion added in 2019. After accounting for the sale of office assets, the largest investors only had net additions of $11.3 billion in office assets – a decline of 49% from 2019. It should be noted that even the industrial and multifamily sectors had a net decline in purchases of 11% and 16% respectively from 2019; however, the decline is more pronounced in the office sector.  While the largest investors are not necessarily the most active buyers and sellers, this change still points to their appetite for the office sector, their concerns over current pricing, and the future performance of the sector. In a survey conducted by Marcus & Millichap, only 27% of office investors expect a price gain over the next 12 months, with an expected decline in value of 2.7%. On the other hand, RCA found office prices rebounded by 3.3% year-over-year in January mainly driven by the suburban office market.

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CRE Gets Boost as Economy Adds 379,000 Jobs in February

The U.S economy is showing signs of recovery with February’s unemployment report as 379,000 jobs were added. To be clear, the economy is no where near pre-pandemic health as the unemployment rate is at 6.2% with 10 million unemployed people. And while these numbers are considerably better than April 2020, they remain far worse than the pre pandemic levels seen in February 2020 (3.5%, and 5.7 million, respectively.)  Nonetheless, this is a positive sign as 355,000 new jobs were in the leisure and hospitality sector, of which 286,000 were in the restaurant and bar subsector, which is viewed as a reflection of, not only the easing of restrictions, but a signal of consumer momentum and appetite for recovery. This should quickly have a positive effect on workforce housing and the class B multifamily sector, as those most affected by the pandemic begin to recover; and, ultimately, should trickle-up to the economy at-large.

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Restaurant and bar subsector giving a signal of consumer momentum and appetite for recovery