Thought to Have Lost Popularity Due to COVID-19... Last Year's US Commercial Real Estate Market 'Largest'

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Contrary to expectations that the U.S. commercial real estate market would decline in popularity due to COVID-19, it experienced a boom last year with record-high transaction volumes.

On the 25th (local time), the Wall Street Journal (WSJ), citing data from real estate information firm Real Capital Analytics, reported that last year’s commercial real estate transaction volume in the U.S. reached $809 billion, doubling compared to the previous year and surpassing the previous record of $600 billion set in 2019.

Initially, it was widely believed that commercial real estate transactions would decrease due to the expansion of remote work following the onset of COVID-19. However, the e-commerce boom and increased usage of leisure facilities due to vaccine rollouts led to a significant increase in commercial real estate transactions last year compared to the previous year. WSJ stated, "This reflects investors’ perspectives on changes in work and lifestyle caused by COVID-19," adding, "Demand for distribution centers, logistics-related spaces, and apartments remains strong, and the U.S. commercial real estate market is expected to maintain a similar level this year as last year."

The region with the highest volume of commercial real estate transactions in the U.S. was the Sun Belt in the Southeast. This area attracted popularity last year due to its low taxes, abundant sunshine, warm climate, and affordable housing prices. Commercial real estate transactions in Dallas and Atlanta, both part of the Sun Belt, amounted to $48.9 billion and $37.1 billion respectively last year. In contrast, Manhattan, which typically ranks high in commercial real estate transactions, recorded $18.7 billion last year, placing it ninth. WSJ explained, "Investors’ interest in urban areas like New York and San Francisco has declined due to the expansion of remote work."

WSJ also added that investors are expressing concerns about the possibility of rising loan interest rates following recent consecutive interest rate hikes.