CRE Confidence Soared in Q1, Says SIOR
- Apr 27, 2021
Commercial real estate professionals’ confidence in the industrial and office sectors in the first quarter of 2021 rose sharply since the fourth quarter of 2020, according to the Society of Industrial and Office Realtors Snapshot Sentiment Report.
The report found a jump from 6.2 out of 10 to 7.3.
Furthermore, the outlook for the remainder of 2021 and the foreseeable future is brighter than any SIOR member-brokers had anticipated for the post-pandemic environment.
The overall market confidence number is perhaps the most telling in determining the level of change year-over-year among the hundreds of brokers queried for the report. The new 7.3 figure marks the highest level recorded since the start of the pandemic in March 2020.
SIOR points to the doubling of on-time transactions since the height of the pandemic as one of the reasons that market confidence has soared; 74 percent of transactions were progressing on schedule in the first quarter of 2021, a notable increase from the 67 percent seen in the final quarter of 2020. Additionally, on-hold transactions plummeted by 83 percent since COVID-19 devastated the market a year ago, and overall canceled transactions dropped to a low of just 9 percent.
SIOR also attributes brokers’ newly bolstered assurance to rising leasing activity, which has surpassed pre-pandemic levels by a hefty percentage. In the first quarter of 2021, 62 percent of respondents reported an increase in leasing, compared to a mere 29 percent in the fourth quarter of 2020, and 60 percent in the fourth quarter of 2019. Ultimately, however, all brokers indicated that the pandemic remains the most overwhelming factor in determining overall market confidence.
Confidence in industrial and office sectors remained on diverging paths, but the gap appeared to close somewhat. Industrial sector confidence continued on the upswing in the first quarter of 2021, jumping to 8 out of 10—a record high—from 6.9 in the fourth quarter of 2020. Additionally, industrial leasing activity reached a new high, skyrocketing to 74 percent in the first quarter, from 40 percent in the fourth quarter of 2020.
While the office sector continues to trail the industrial sector in performance, the numbers are up, and brokers are optimistic about the future. “A needs analysis is critical. With the economy coming out of the pandemic, many companies are struggling to understand what their office needs are,” a New Mexico-based SIOR member responded in the survey.
The office sector saw a dramatic rise in confidence, with the rating jumping from 4.7 percent in the fourth quarter of 2020 to 5.9 percent in the first quarter of 2021. Additionally, on-time office transactions increased 14 percent quarter-over-quarter, growing to 60 percent in the first quarter of 2021, and canceled transactions dropped a whopping 32 percent to just 14 percent, a figure not seen in nearly an entire year.
As SIOR notes in the report, the survey results indicate that the real estate market has exceeded expectations as the world moves toward post-pandemic mode and is primed for a plethora of new business for the remainder of 2021 and the immediate years ahead.
Read the full report by SIOR.