With 2021 drawing to a close, you might find yourself wondering what 2022 has in store for the world of commercial real estate. While the tumult of 2020 demonstrated that the future is often unforeseeable and nothing is for certain, industry experts can still offer us informed predictions of what the new year will bring, considering issues such as remote and hybrid work, technological advancement, and sustainability.

Based on projections from The Counselors of Real Estate, PwC and the Urban Land Institute (ULI), here are a few notable commercial real estate trends to watch in 2022.

1. Commercial real estate transaction volume will rebound to nearly pre-pandemic levels.

After dropping from $617 billion in 2019 to $453 billion in 2020, transaction volume is projected to reach $600 billion in 2022, according to the ULI Real Estate Economic Forecast for 2021 to 2023.

2. Issuance of commercial mortgage-backed securities (CMBS) will also bounce back.

After reaching a post-great-financial-crisis high of $98 billion in 2019, CMBS issuance plummeted to $59 billion in 2020. However, the ULI predicts that figure will reach $90 billion in 2022 and $95 billion in 2023. 

3. Investment in industrial property will increase.

Industrial funding will rise due to growing demand for e-commerce warehouses, according to the 2021-22 Top Ten Issues Affecting Real Estate® report from The Counselors of Real Estate.

4. Property tech (proptech) innovation will be an influential force in the property management space.

Just as businesses in other industries have adopted new IT solutions to adapt to evolving consumer expectations and gain a competitive edge, companies in the commercial real estate space have deployed high-tech products and will likely continue to do so in 2022 and beyond. Proptech can streamline operations and provide a competitive edge, according to the Emerging Trends in Real Estate 2022 report from PwC and ULI.

For example, property management companies can utilize software to adjust heating and cooling levels depending on a building’s occupancy, resulting in lower spending.

As property managers, the Avalon Realty team can help create an optimal environment for your tenants. To learn more, please visit our client services page.

5. Environmental, social and governance (ESG) initiatives will drive decision-making.

Organizations in the property sector have realized the importance of working to reduce carbon emissions and energy use, according to PwC and the ULI. The vast majority (82) percent of the real estate and urban development professionals surveyed for the Emerging Trends report said they take ESG factors into account when making decisions related to investment or operations.

In the same vein, the report from The Counselors of Real Estate states, “Investor and market demand for ESG in real estate spans the globe with the key questions being what is material, where are we vulnerable, and which strategies will cost-effectively mitigate risks. Transformative, enterprise-wide ESG programs in all sectors of real estate can be one of the best ways to reduce carbon emissions, accrete value, and demonstrate reputational value.”

If you’re interested in ensuring your property is environmentally friendly, we can help you achieve maximum energy efficiency with technologies such as wind generators and cost-saving variable frequency drives.

6. Changing remote and hybrid work policies will lead to shifts in demand for office space.

It’s not clear yet how many employees who transitioned to working from home during the pandemic will end up back in the office full-time. Many companies have already adopted hybrid strategies that involve a mix of on-site and remote work, according to PwC and the ULI.

The Counselors of Real Estate advise property managers to stay flexible and prepared to respond to fluctuations in demand in this area: “Time will tell as to which population migration and space use behaviors will endure, as all real estate sectors will be watching closely and poised to react.”

If you’re interested in learning more about commercial real estate trends in the national and Chicago markets, don’t hesitate to reach out to the Avalon Realty Associates team by calling 847-506-1000 or emailing info@avalonreal.com. Visit our client services page for more information about how we can assist you with property management, real estate brokerage, property investment, and tenant representation.