With vacancy levels reaching over 12% in certain sectors across the US, you need to be aware of the current commercial real estate trends and forecasts for 2022.
Which sectors have grown throughout the pandemic? Which sectors have seen increasing vacancies? Read on to learn about the sectors that are seeing growth in Southern Maryland and the sectors that have taken a hard hit.
Commercial Real Estate Trends In Southern Maryland
Here are the trends and outlooks you can expect to see in commercial real estate in Maryland as we move into 2022.
Positive Outlook For The Industrial And Healthcare Sectors
The industrial market has remained solid and unaffected by the challenges of the pandemic, and the healthcare sector, too, has flourished.
Maryland is one of the four life science clusters in the US, and with the vaccine rollout, there has been tremendous growth in the industry. Vacancy rates for lab clusters are below 4% due to the public-private partnership Operation Warp Speed which aimed to boost the efficiency of the vaccine rollout and facilitate a speedy recovery from the COVID-19 virus.
Hospitals and medical care providers have been seeking to expand, with high hospital occupancy rates due to the coronavirus crisis. They are branching out and acquiring office and retail spaces to take advantage of the vacancies in these sectors.
The Office Sector
The pandemic has caused a dramatic and swift restructuring of business operations. We have seen an excessive number of businesses adopt hybrid and remote working models to save costs on office spaces.
63% of high-growth companies currently use or are planning to adopt the hybrid work model. More businesses are considering switching to the hybrid work model to improve work-life balance and employee satisfaction. However, this means that there are and will continue to be negative consequences for the office sector.
However, the office sector in Maryland has not suffered as dramatically as other areas, retaining an 87% occupancy rate. Still, this figure isn’t optimal compared to other sectors and will likely worsen as more companies adopt hybrid and remote work models and employees favor working from home.
So, what are investors doing to compensate for the current and potential decrease in demand for office spaces? Here are some of the adaptive reuses for office spaces:
- Medical care companies are purchasing office spaces for expansion.
- Investors are converting office buildings into multifamily housing.
- Offices are being repurposed and converted into flex spaces.
There is still hope for the office sector, but the pandemic has turned companies and businesses away from their need for in-office operations. Adaptive reuse is critical should we hope to retain occupancy levels in the office sector.
Warehouse Spaces
The pandemic has stimulated massive growth in the eCommerce sector, encouraging more consumers to shop online for groceries and everyday items. The lockdown period caused many retailers to close down, pushing consumers to shop online.
As more consumers use eCommerce and benefit from its convenience, it is predicted that 95% of purchases will take place on eCommerce platforms by 2040. With this positive outlook for eCommerce, we see an increased demand for warehouse spaces and spaces near ports for overseas shipments. This is because many eCommerce sellers outsource their products to manufacturers in China.
Vacancy rates are low for warehouse spaces in Southern Maryland, with a 93% occupancy rate. We can expect that the demand for warehouse spaces will only increase as time goes on.
Flex Properties
With the booming eCommerce sector comes an increased interest in flex properties that have the combined features of warehouses and office spaces. With plenty of new small businesses in the eCommerce sector, you can expect these hybrid industrial and office spaces to be highly sought after in the coming years.
There are strong vacancy and rental figures in this sector, with a 92% occupancy rate and continued growth predicted in this sector.
The Retail Sector
The retail sector has taken a brutal hit across the US since the pandemic began. Restaurants and retail stores were closed down when consumers were placed on lockdown. Maryland is still seeing substantial vacancy and rental figures, with only 6.5% of properties vacant, and the recovery of the retail sector is likely as consumers re-enter the streets. Medical providers are also drawn to retail spaces, as they offer more exposure and customers can easily find parking to access healthcare facilities.
However, the rise of the eCommerce sector suggests that lower demand for retail spaces is looming as consumers favor online shopping over in-store purchases.
Summary
As we move into 2022, we will likely see demand for warehousing and flex properties continue to increase as the eCommerce industry grows. The office sector will likely continue to face a decreased demand as more companies adopt hybrid and remote working models. The retail sector’s future is uncertain as the rise of online shopping seeks to uproot retail stores in the coming years.