A Quarterly Update
It’s hard to believe we’re already heading into the second month of the new year. As we dive into 2022, it’s important to look forward to see what might be coming in the months ahead. Commercial real estate has made a remarkable recovery since the onset of the pandemic two years ago. We went from seeing significant declines in sales and leasing activity in 2020, to market activity not only resuming in 2021, but CRE recovering ground lost during the COVID-19 pandemic. Keeping the record-setting momentum going from last year, 2022 is looking strong for CRE. To kick start the new year, Gary Bechtel, Chief Executive Officer of Red Oak, a Michigan-based bridge lender, shares insights about where he sees the commercial real estate market going in 2022, the top areas and asset types to consider investing in and why. According to Bechtel, “2022 looks to be another active year in commercial real estate, whether it be on the lending, sales or leasing side. With regards to commercial real estate bridge lending, the space that Red Oak Capital is involved, I think this year will continue to be flush with capital, as the amount of bridge loans funded continues to grow, capital continues to look for opportunities in the space and investors continue to purchase increasing amounts of CRE CLOs as they come to market.”
Where to Invest?
So where might all that capital best be put into play? Bechtel says, "I think there are a number of asset classes and markets for us to focus on in 2022, with multifamily and industrial continuing to be the darlings of the market, both from a finance and investment standpoint, followed by office, retail and hospitality, though there are also some excellent opportunities in self-storage and manufactured housing as well.” Investment strategies can encompass a wide array of markets across the United States. While major markets in gateway cities tend to attract attention of investors, there are sound opportunities in other secondary or tertiary markets, too.
Strong Growth in Various Markets
Bechtel points out, “We have seen tremendous growth in a number of secondary markets like Austin, TX, Nashville, TN, Charlotte/Raleigh, NC, and Salt Lake City, which are all experiencing large increases in their populations, and to a lesser degree tertiary markets like Gainesville, FL, Lincoln, NE, and Huntsville, AL. The urban markets across all property types were heavily impacted during the pandemic and have been slower to recover relative to the markets I previously outlined, though they will recover, albeit more slowly.” Given the impact of the pandemic on where people want to live, the different government policies about lockdowns, and because many companies now allow employees to work remotely, the U.S. is experiencing interesting changes. Bechtel concludes, “I think we are going to continue to see major population shifts for a number reasons and these will continue to benefit some of states like Florida, Arizona, Tennessee, Texas, Utah and the Carolinas.” Overall, there is a lot of strong momentum heading into the new year. As Gary outlined, the bridge loan segment is expected to continue growing, a variety of asset classes and markets will offer great potential investment opportunities, and secondary markets will continue to thrive. Does the bright future of CRE in 2022 motivate you to invest differently or take bigger risks?