Almost daily, I am asked what the commercial real estate outlook is for 2021. Investors are nervous because 2020 and the COVID-19 pandemic created chaos with certain property types.
My primary real estate specialty is helping investors place money in safe investment properties. Stock market investors look for security and growth. Real estate investing is no different. Economic fallout from 2020 certainly will affect real estate in both positive and negative ways. Understanding how the market will shift in the coming quarters and years can enable investors to safely park their money in the right investment vehicle.
The Central Savannah River Area (CSRA) has not been immune to a downturn in the real estate investment market; however, it is safe to say that the area has fared much better than others.
Based on an analysis of CoStar transactions for 2020, as well as the current listings on the market, it is easy to see which property types are clear winners and clear losers: income property transactions have increased while development sites are seeing lower demand.
Since I first got my real estate license, multifamily properties have always been the safest property type for investors. This trend remains true across the United States and is certainly true of the CSRA. Good multifamily properties sell faster and for higher rates of return than any other investment property type. Despite issues in 2020 with evictions and unemployment, I suspect these types of investments will continue to lead the market. Multifamily makes the winner list every year.
The other big winner in the CSRA is industrial property. The industrial property market suffered back in 2006-2010. Since then, industrial buildings have steadily absorbed most of the vacant space available. Large industrial space is almost non-existent in the market. This has led to new construction projects such as FL Smidths 150,000-square-foot building, the 556,686-square-foot Club Car building, and the Amazon fulfillment center under construction in Columbia County’s new White Oak Industrial Park.
Demand for industrial space has held strong largely because of the low cost of living in the area, lower wages per capita, access to good modes of transportation and friendly state tax credit programs. The larger industries moving into the area will also support smaller industrial buildings for ancillary services. These types of buildings are what most local investors are interested in as a safe investment.
Office space demand has remained even across the CSRA. Investors are not seeking to buy income-producing office buildings due to instability of tenants. In previous years, office space was a safe investment, especially with the increase in demand from defense contractors related to the cyber industry. Demand from defense contractors slowed down due to the Georgia Cyber Center absorbing most of the larger contractors such as BAE, Northrup Grumman and Parsons. The future for defense contractor office space is still bright. The timeline for the influx of cyber contractors and subsequent office space demand remains elusive. Class A office space has seen little-to-no demand in the past two quarters of 2020 across the entire CSRA.
Class A office space may be the loser of 2020, but medical office is a winner. The pandemic has resulted in increased capacity demands for medical users. MOB’s (medical office buildings) have long been a safe property type for investors. This trend seems like it is going to continue in the CSRA. Demand for MOB’s in this area is largely due the large medical district, which has a regional impact.
Commercial land sales and development are expected to continue in the CSRA, just at a reduced speed. Land sales steadily slowed in 2020. Property values have decreased slightly due to oversupply. Speculative new construction projects have slowed while build-to-suit projects have remained steady.The 2021 outlook for investment property in the CSRA is overall positive. Growth is expected to slow down slightly as demand slows and supply increases. Pricing will see a downward push also in all property types with the likely exception of industrial, medical office, and multifamily properties.