The 2022 Outlook for Commercial Real Estate Appraisals

The 2022 commercial real estate market is shifting and pivoting as a result of the pandemic.

There has been increasing focus on return to work strategies, considerations concerning climate change, and social politics. The rising interest rates are also on everyone’s minds, as are the ongoing supply chain disruptions which are affecting e-commerce and logistics.

We are also seeing that office employers are balancing safety and productivity, which may change the way offices look moving forward.

Luckily, there is also good news on the horizon as retail remains in a healthy recovery trajectory. Industrial spaces are also grabbing extra attention due to the changing demands in e-commerce.

Here is a look at the biggest themes moving forward into 2023.

Return to Office

Many are returning to the workforce, often in a work-from-home capacity, which forced many businesses to shift to a hybrid workforce model.

With a hybrid workforce, there are far fewer employees in the office at any given time, which reduces the amount of space needed. Typically, the standard has been a few hundred square feet per employee, with cubicles being the best option for semi-private spaces and economy.

But now, office managers may be looking for different kinds of office setups. With employees only coming into the office for collaboration time, open-plan offices or another format may be more conducive to the changing workforce structure.

High Demand for Industrial Real Estate

Over the past number of years, industrial real estate has been in higher demand than ever, largely due to the recent explosion of e-commerce. Warehouses, as well as distribution facilities, are in high demand from retailers like Amazon and Walmart.

Also, with significant supply chain delays and interruptions, some companies are looking for more local and inland industrial real estate to account for rising costs and unreliability. This will mean companies will look for manufacturing sites that are closer to distribution venues and vice versa.  

Retail Recovery

Particularly strip malls in residential areas with dense populations are doing especially well, as retailers are looking for more brick-and-mortar locations to re-capture the in-person market.

Within this context, landlords will also be thinking about keeping a more diverse tenant mix to include food and hospitality, services, and retailers to create a better draw, stabilize their income, and safeguard against further disruptions.

Increasing Importance of ESG

The Environmental, Social, and Governance framework will become a more significant part of the considerations given to commercial real estate portfolios. It manages and assesses risks and opportunities by taking into account market and non-market factors.

The environmental criteria look at the company's environmental impact and stewardship. 

The social criteria consider how the company manages relationships and creates stakeholder value. 

The governance criteria consider the company’s management philosophies.

The rise of ESG can be attributed to the greater acceptance of climate change, regulators enacting stricter policies, and investors looking for more transparency and engagement.

Rising Interest Rates

Interest rates have not hit any kind of all-time high, but the recent hikes are a reality check after the previous years of relative ease. Rates are also expected to increase over the course of this year and possibly over the coming years.

Upgraded Software Solutions

There is no doubt that, as commercial real estate investors seek out new team members such as brokers, appraisers, and agents, they will look for people who can offer the most in the way of reporting options and software savviness.

Appraisal software solutions are a must for both appraisers and their clients to keep things organized and have convenient access to high-quality and easy-to-read reports.

Valcre provides end-to-end appraisal software that can be easily accessed in a secure cloud database. To find out more about how Valcre can help your appraisal practice, reach out to us today.