Crexi National CRE Trends Report 2020 Overview

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The coronavirus pandemic upended the commercial real estate market in 2020, with long-standing effects that will impact CRE sectors to various degrees. However, recovery is well on its way, and with it, foundational shifts in investor fundamentals, leasing demand, and the way we live. Our 2020 overview report dives into buying and leasing activity on Crexi throughout the year, comparing it to quarterly metrics and year-over-year data.

With these unique information and insights, we seek to shed light on the undercurrents of commercial real estate activity with an eye towards the sector’s future.
Metrics and Methodology
This article relies on data from Crexi’s internal marketplace. In particular, to ascertain timely and representative trends in seller sentiment, this article focuses on offering metrics, such as average asking price per square foot, cap rate, and monthly rents, in addition to listed occupancy, tenancy, and square footage. Using these listing-based metrics and changes therein, we can use seller expectations at the time of listing to approximate overall valuation trends.

While these data aggregations may broadly reflect prevailing market conditions, it is essential to note that variations can also be affected by inventory changes, asset size, etc. We pair these data points with internal data from Crexi buyers on search trends and acquisition-related actions performed on Crexi to provide a holistic understanding of where both sides of commercial real estate are headed.
What Happened In 2020
Though all projections had pointed to a fruitful year ahead , the coronavirus pandemic dashed the US economy’s growth streak in Q2, with GDP plunging 31.4% from 2019’s levels. A mere three months later, Q3 yielded 33.1% GDP growth as lockdown restrictions cooled and governmental aid packages kicked into effect. This impressive rebound and the promise of vaccines on the horizon drove further recovery in H2 2020, despite holiday seasonality.

As the year ended, several COVID-19 vaccines were approved and Congress in the 11th hour passed a second federal stimulus package. Deloitte’s 2021 economic forecast projects the return of normal economic activity in mid-2021.

A new White House administration also promises some change to the world of CRE. President Biden’s election anticipates additional federal stimulus to buoy consumer spending, stave off rent evictions, and continue support for small businesses. There is some concern that a Democrat-controlled Congress will enable more tax policy adjustments in Biden’s agenda, such as adjusting 1031 tax exchanges. However, CRE professional sentiment remains positive looking ahead: CBRE’s Capital Markets Recovery Index said investor morale improved 60% from its lows in April 2020.

Despite a shock in Q2, commercial real estate was relatively well-equipped to handle the turbulence of 2020 thanks to an even-keel supply and demand before COVID-19 and plentiful investment dry powder on the sidelines. According to Prequin’s quarterly update , North American REITS across asset classes were sitting on almost $200 billion in dry powder in December 2020. More investors emphasized price discovery and risk aversion than ever before, relying on CRE data advances to inform decision-making. Too, interest rates lowered drastically and will likely remain so for several years, putting pressure on cap rates and requiring banks to tighten their lending requirements as inflation exceeded 2%.
Despite a shock in Q2, commercial real estate was relatively well-equipped to handle the turbulence of 2020.
Of course, the pandemic impacted some property types far more than others. Overall, global CRE volume dropped 36% year-over-year in Q2 2020 due to deal stagnation and market uncertainty. According to Deloitte, retail and office prices declined significantly before seeing some recovery in late Q3, while industrial properties rose 7.4% year-over-year . Rent collections have stayed steady in several sectors, mostly thanks to tenant incentives and protections and leasing concessions. However, the pandemic has drastically shifted the way populations live, work, and spend their free time, requiring specific property sectors to update with the times.

Namely, digital processes transformed the way businesses worked and consumers spent. E-commerce activity surged at unprecedented rates while social media and Zoom became our primary methods of connecting with others. By the same token, CRE companies continued to adopt digital tools such as cybersecurity measures, digital marketing platforms, and data analytics to make more informed decisions.
Crexi’s Commercial Real Estate National Trends
Seller Behavior Trends
While prices on Crexi in Q1 2020 dropped slightly off the previous quarter’s highs, average asking price per square foot unsurprisingly plummeted by an additional 3.43% in Q2 as the country closed all but essential businesses. Most commercial real estate investors paused new investment activity as they took stock of the new normal and its potential impact. In Q3 and Q4, however, the average asking price per square foot recovered considerably from the first half’s downturn, ending 2020 between 10-12% higher than Q1 prices.

Occupancy rates took longer to be affected by COVID-19, only dropping around 1% on new listings that came online in Q2. The second half of the year saw increasing levels of vacancy, which only leveled off in December . Overall, occupancy across new assets listed on Crexi dropped 12.39% in 2020.

Another trend that emerged in commercial real estate in 2020: we saw a massive uptick in brokers and sellers using online platforms to list and market their properties. On Crexi, we observed an exponential increase in new listings on our site. Q1 represented an all-time high with more than 10,000 listings added. This number more than doubled to hit 22,000 in Q2, 34,000 in Q3, and another 29,000 in Q4, with 100,000 new assets added in 2020. With brokers, buyers, and sellers stuck at home, CRE tech became an essential tool in seeking and transacting on property.
With brokers, buyers, and sellers stuck at home, CRE tech became an essential tool in seeking and transacting on property.

*These numbers may periodically change as the Crexi team continually updates our methodology and improves listing categorization, so as to better match investors’ search preferences and more accurately reflect industry trends.
Buyer Behavior Trends
Overall, buyers on Crexi were hesitant to make serious investment decisions until a few months into the pandemic. While some investment deals closed before and during the nationwide lockdowns, Q3 2020 was by far the most active quarter, with multifamily leading the recovery’s charge. Buyer actions on Crexi jumped 26.6% following a COVID-induced lull in Q2 and another 8% in Q4 despite the election and holiday seasonality.

At the start of 2020, retail properties saw the highest number of received offers through Crexi. The second quarter corresponded with a pandemic-induced flatline in retail offers, causing the sector to fall behind industrial and multifamily. However, Q3 and Q4 saw retail re-emerge following COVID-induced challenges as the hottest asset class once more, attracting nearly twice as many leads as the next-most closed-on type (multifamily) and receiving 32% more offers in H2 2020.

Industrial properties also experienced a surge in buyer interest, with offers for the asset type growing 310% from Q1 to Q4. This is unsurprising: industrial proved to be one of the most recession-resilient property types thanks to a surge in e-commerce and storage demand. In fact, industrial and land asset classes were the only two property types to see increases at the start of COVID-19, remaining resilient among investor squeamishness.

Hospitality ended 2020 a far cry from how it started. We roared into the new year with buyer activity increasing on every asset type, led by a 28% surge in actions surrounding hospitality assets from the previous quarter. However, this was not to last, as hospitality deals saw waning interest throughout the year and performed particularly poorly compared to other property types less impacted by pandemic-related closures.
Landlord Trends
On the leasing side of our marketplace, we saw increases in the amount of new listings coming online in every quarter indicating a delayed response to the pandemic. However, in Q4 there was some drop in newly activated listings over the holidays, though not as severe as expected.This is likely due to an increase in sublease spaces, which steadily rose in volume throughout 2020.

Q4 was also the only quarter to observe a decrease in average asking rates per month, possibly to entice tenants after two subsequent quarters of rising vacancies and the pending end of rent relief benefits in many states. It remains to be seen whether asking rates will rise again following the passing of Congress’ second stimulus bill and the Biden administration’s promise to expand small business protections in the wake of COVID.
*These numbers may periodically change as the Crexi team continually updates our methodology and improves listing categorization, so as to better match investors’ search preferences and more accurately reflect industry trends.
Tenant Trends
While leasing activity momentarily paused after COVID-induced closures began, that didn’t stop prospective tenants from researching and weighing their options. We observed lease actions more than double every quarter as demand shifted to online marketplaces to find CRE options that matched their changing needs.

Furthermore, tenants engaged more with prospective options, as evidenced by a 20% jump in lease activity per listing. This trend persisted across asset classes: despite little movement from Q1 to Q2, the remainder of 2020 witnessed significant jumps in tenant attention in each of the main property types. Retail by far captured the most attention: year-over-year growth saw a 45.3% increase in tenant activity surrounding retail assets.
Asset Type Trends
A meteoric rise in e-commerce singled out industrial as one of the most resilient sectors in COVID-19. E-commerce activity grew 44.5% in Q2, stimulating unprecedented demand and catalyzing additional industrial and logistics development on top of existing projects and supply. Currently, there’s plenty of development completion on the horizon, with record levels of approximately 250 million square feet absorbed in 2020. Demand was concentrated in several Southwest and Southeast markets, particularly in Phoenix, the Inland Empire, and the Sunbelt.

Average asking prices per square foot remained reasonably consistent throughout 2020, lending considerable support for industrial’s recession resilience. The asset class comprised approximately 13.07% of Crexi’s total inventory in 2020, with a surge in new assets coming online in the first three quarters followed by a cooldown period in Q4.
Buyers flocked to industrial in 2020, with more than a 50% increase in buyer searches and activity from Q1 to Q4. Industrial was the only asset type to increase in buyer activity every month in 2020 except March, where it saw the least amount of fallout of all property types on Crexi.

Industrial property for lease also observed a surge in tenant interest, with a 235% increase in lease-related activity from Q1 to Q4 2020. Tenant activity on industrial assets also grew by 25% in Q2, a period when lease actions on most other property types were sharply down quarter-over-quarter. Yet, while asking rates increased in the first two quarters of 2020 — bucking the downward pandemic trend — they have shown some signs of correction in Q4.
Land remained one of the most numerous asset classes on Crexi again in the fourth quarter, though fewer assets came online for lease than were for sale. There was noticeable growth in Q3 , where land parcels saw both an increase in the number of assets and the overall square footage of those assets. In particular, commercial land saw huge increases each quarter, ranking as the most listed subtype on our platform.

Land deals also observed a consistent increase in buyer activity, up 27% from Q1 to Q4, though there was a similar leveling off of buyer interest at the year’s end. It’s likely investors saw land as a promising long-haul investment to develop more recession-resilient properties than disadvantaged retail and hospitality asset types.
Tenants, on the other hand, were less interested in land assets at the start of the year. However, over time, tenant activity steadily increased by 64% from Q1 to Q4.
In the wake of COVID-19’s heady impact on retail assets, the sector’s mid-year recovery assuaged fears of more catastrophic losses despite trailing somewhat compared to other CRE property types. Retail was buoyed in 2020 by essential business such as grocery stores and pharmacies, particularly as investors sought stable, long-term net lease investments to add security to their portfolios. In the future, many retail properties hit hardest by the pandemic will offer opportunities for savvy retailers, including converting to adaptive reuse, transforming vacated malls, and “dark stores” optimized for curbside pickups.

Just over 25% of Crexi listings are retail, a number which grew throughout the year only to fall in Q4 with a slowdown of listing activations. Though retail assets received more than twice as many offers and buyer activity as the next most popular asset type, it still has not returned to its peak January levels. This is the only asset type for which this is the case: all other property classes had exceeded January levels by October 2020.
Like most other asset types impacted by COVID-19, retail saw a drop in average price per square foot in Q2 and a rebound in the following quarters. However, retail’s recovery has been relatively subdued compared to assets such as multifamily and industrial. The asset class owes much of its overall stability to essential businesses such as grocery stores, quick-service restaurants, and pharmacies.

Conversely, leasing activity surrounding retail on Crexi has shown significant recovery since its Q2 drop. Tenants looking for retail properties for rent have increased their activity every month since March, with metrics surging 121.2% from January levels. At the same time, average lease asking rates for retail assets declined only slightly in the second half of the year, likely thanks to stimulus packages that delayed some of the effects of pandemic-related closures.
Office assets faced similar struggles to retail assets, though many organizations have shifted their demand needs to adapt to COVID-19’s impact. According to Deloitte’s 2020 Global Millennial Survey, 60% of respondents said they wanted the flexibility to work remotely more frequently, even post-COVID. As such, many investors have shifted attention from urban, clustered office assets to flexible workspaces and suburban and secondary market Class B and C assets that fit the shift to hub-and-spoke office models.

Following a Q2 drop in average asking price per square foot, office assets have climbed to surpass Q1 2020 levels. Conversely, occupancy rates have plummeted from 84.79% at the start of the year to 65.54% in Q4. This reflects the broader trend of large office tenants downsizing from large square footage leases or multi-tenant rentals to move to a hub-and-spoke model of a central headquarters and smaller, suburban satellite offices.
Office assets comprised 18% of Crexi’s total inventory, mirroring retail’s activation levels with a strong Q3 followed by a drop in new listings in the fourth quarter. Buyer interest in these assets, expectedly, paused in the second quarter as most companies adapted to lockdown-imposed work-from-home operations. Since then, buyer activity has rebounded, eclipsing investor interest at the start of 2020.

New office listings for rent also saw a significant increase in asset volume in 2020 with a 32.8% year-over-year. While this growth is somewhat slower than other for-lease asset classes, office asking rates have remained remarkably steady given the upset of COVID-19. It’s likely landlords were reluctant to adjust asking prices until the future was assured and tenants on the market for new office properties in this period were more likely to sign at the original rates.
Multifamily was by far one of the most resilient property investments amid COVID-19, due in part to renter protections and unemployment benefits provided by the CARES Act, state-level benefits, tenant incentives, and the simple fact that people will always need a roof over their head. Widespread work-from-home policies allow renters to work far from office, expanding their option to live in more desirable markets with lower rent costs, bigger square footage, and outdoor space access. More and more residents are choosing to live in rentals to avoid the high cost of homeownership. Despite record home sales during the pandemic, multifamily investments totaled approximately $111 billion in 2020, per CBRE.
While multifamily owners lost rental income made concessions for financially-impacted tenants, people still prioritized paying rent. The National Multifamily Housing Council’s Rent Payment Tracker reported on-time rent payments returned to pre-pandemic levels in October and November. However, December saw a drop to 75.4% of on-time payments, likely due to holiday seasonality and the looming expiration of unemployment benefits. Q4 also saw the CDC extend its previously issued rent moratorium to the end of January 2021, though it is likely the Biden administration may provide further protections and rent assistance.

While average asking prices per square foot were particularly hit hard by COVID in Q2, multifamily experienced a strong rebound in the third and fourth quarter. The asset class was also the only type to increase total listings in Q4, even though multifamily only comprises about 6% of active inventory. The apartment building subtype led this charge in Q4, followed by single-family rental portfolios and mobile home parks for sale. At the same time, occupancy rates stayed relatively high compared to other assets, thanks to renter protections passed in 2020.

Multifamily assets are hugely popular on Crexi, portraying a seller’s market for multifamily deals on Crexi as year-long buyer interest outpacing listing growth trend.
The information in this article is based on Crexi’s internal marketplace data and additional external sources. Crexi internal marketplace data consists of aggregated property-level data points provided by brokers and validated internally by Crexi.

While these data aggregations may largely reflect prevailing market conditions, variations can also be affected by inventory changes, asset size, etc. Nothing contained on this website is intended to be construed as investing advice. Any reference to an investment’s past or potential performance should not be construed as a recommendation or guarantee towards a specific outcome.
Occupancy: The percentage of occupied square feet in a building.

Absorption: A measurement of the net change of the supply of commercial space in a given real estate market over a specific period of time. Total absorption is new square footage leased by tenants minus vacated square footage vacated by tenants and made available on the CRE market.

Asking Price per Square Foot: The asking price per square foot of a building for sale.

Asking Rate per Square Foot: The landlord’s asking rent rate per square foot for a building or market.

Asset Type: Also called “Asset Class” or “Property Type,” one of four main categories in commercial real estate: retail, industrial, multifamily, and office. Also can refer to smaller categories including land, hospitality, etc.

Asking Cap Rate: Net Operating Income divided by the Asking Price.

Vacancy Rate: The rate of vacancy in the listed property.

Buyer Activity: Acquisition-related actions taken by users on Crexi sales property pages.

Buyer Searches: Internal site searches taken by users on Crexi sales or lease.

Lease Activity: Leasing related actions taken by users on Crexi lease property pages.

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