Interview, Fireside Chat
Commercial Real Estate and the Economic Recovery
- Office utilization is projected to rise from the present through Labor Day and into September, with leasing activity expected to increase subsequently to improve occupancy and drive rent growth for office REITs.
- Companies are advised to plan for peak utilization at 100% of their workforce given schedules of one to two remote workdays per week.
- The proportion of CEOs expecting reduced office space post-pandemic is anticipated to evolve as summer transitions into fall, while other cities ahead in return-to-office trends may offer guidance for New York and San Francisco.
- Retail REITs are expected to see a temporary recovery in open-air occupancy during the current year and next, resulting in rents higher than previous rates and continued near-term benefits from reopening.
- The long-term outlook for mall REITs is considered less constructive due to weaker fundamentals in space demand.
- Industrial REITs are expected to experience market rent growth in key metro markets over the next few years, driven by development following the 2020 slowdown.
- A well-performing economy correlated with inflation is viewed as beneficial for REITs and tenant affordability, while assets with shorter lease terms like hotels, storage, and apartments are positioned to reset rents more quickly.
- Properties with five to ten-year leases are expected to receive slightly higher rents annually through built-in escalators, with full market rate resets occurring at lease expiration.