Q2 2021: Housing on the up, office, and retail stable

Based upon figures through the second quarter of the year, the latest statistics from analysts at Moody’s indicate many reasons for positivity in the second half of 2021.

According to the economic data specialists, multifamily property is showing the strongest health across the US, while office and retail spaces are projecting “stability”.

Rent levels in multifamily had “bounced back” after “bottoming out earlier in the year”, finding a growth rate of 0.6% – in both asking and effective rent on a national level. This does not however put them at record levels, as they remain some 2.5% lower than the levels seen at the beginning of 2020 which was a record-breaking quarter.

“This recent bump in rent levels combined with a rosy economic outlook for the remainder of the year places a full recovery within the next 12 months firmly in reach,” reads the preliminary trend report.

Stable, not stressed

Although the headlines for commercial office and retail spaces are less ebullient, Moody’s says the data “shows a lack of stress”, and they say this may be the actual big news “considering the context”.

The report author and senior economist Thomas P LaSalvia cautiously offers: “While we are not yet ready to take future large scale declines off the table, the modest 0.3% effective rent decline in office and somewhat surprising effective rent growth of 0.1% for retail has, at least temporarily, moderated the glut of negative sentiments across analysts and industry stakeholders”.

LaSalvia is a commercial real estate specialist, curing CRE models and managing credit risk analysis for Moody’s. He also wrote the Q1 analysis for the company.

Regional variations

This is largely in keeping with reporting we are seeing from other sources, and for regionally specific outlooks such as Orlando and LA, as well as growth in individual investment vehicles with a focus on multifamily.

Multifamily also continues to be a sphere for innovative living solutions, such as multi-generational living which may be why they seem to be courting the favor of analysts currently.

East Tennessee

While the above evaluations for the national and regional levels are somewhat conservative, East Tennessee has seen an unprecedented comeback.  Heidi Adams, a senior investment advisor with NAI Koella | R M Moore stated, “The influx of new residents to East Tennessee has created a positive affect on the commercial real estate market on multiple levels.  The increase in our population has garnered the attention of more national retailers which has helped to boost the retail sector.  Additionally, investors who once snubbed Knoxville as a tertiary market now have their eyes on us and are actively investing in multifamily properties as well as available office and retail plays.”

Local economic advisors expect that Knoxville will see continued growth over the coming years and commercial real estate experts foresee that the East Tennessee market will remain strong.