Commercial Real Estate 2021: The Winners and Losers

Dec 20, 2021

In 2021, multifamily reigned as the top property type in the commercial real estate industry. Industrial and self-storage were also strong performers, while retail, office, and hospitality, on the other hand, remained on shaky ground.


The 2021 figures for the U.S. multifamily sector are nothing short of impressive.

According to commercial real estate services provider CBRE, the multifamily market set a new quarterly absorption record of 251,500 units in the third quarter. Meanwhile, the overall vacancy rate dropped to a record-low 2.9% during the quarter.

Looking at the market more broadly, record-setting net absorption of 450,100 units for the first nine months of 2021 outpaced new supply, CBRE indicated. During the same period, investment volume approached $179 billion, putting the sector on track to exceed the record of $193 billion in 2019, according to CBRE.

The multifamily market is expected to achieve continued success in 2022 as CBRE predicts a 10% to 15% rise in investment volume in 2022 compared with 2021.

“The multifamily sector is set for a record-breaking 2022 amid solid fundamentals and heightened investor interest,” according to CBRE. “With tremendous liquidity and a growing range of debt options available, multifamily pricing will be as strong as ever.”

A July 2021 forecast from Fannie Mae paints an even rosier picture for multifamily, predicting that factors such as demographic shifts, job growth and the lingering housing shortage may help boost demand for multifamily housing over the next five years.

Single-family rentals (SFR) and build-to-rent (BTR) communities, a subsector of the multifamily industry, saw a tremendous increase in demand in 2021. In September, SFR rent growth climbed 10.2%, the fastest year-over-year increase in over 16 years, according to the CoreLogic Single-Family Rent Index.

SFR and BTR growth was accelerated by the COVID-19 pandemic, which increased the desire for homes with more privacy and space. Examples of 2021’s rise in the SFR and BTR market are abound, including Arbor Realty Trust’s pipeline of SFR deals worth more than $1 billion. Like ArborCrowd, Arbor Realty Trust is a member of The Arbor Family of Companies.

Citing data from the National Association of Home Builders, USA Today reported in November that the number of homes built exclusively for rent had jumped 30% in the past five years. CBRE expects the SFR market to gain even more traction with investors and renters as more millennials create families.


As e-commerce continues to capture an ever-growing share of the retail market, e-commerce companies need places to park their goods. As a result, demand for industrial properties — particularly those supporting last-mile delivery — keeps growing.

“The U.S. industrial market has accelerated at an unprecedented pace as pandemic-induced demand has reached all corners of the country,” commercial real estate services provider Colliers International said in a report released in November.

Asking rents for warehouse and distribution space increased 5.6% in the third quarter of 2021 compared with the same period in 2020, according to Colliers. The quarter’s typical asking rent of $6.65 per square foot is the highest asking rent on record. Meanwhile, the vacancy rate during the same period fell by 1.1 percentage points.

“The accelerated growth of the industrial sector has been nothing short of astonishing,” Colliers noted.

In the report, Colliers indicated industrial activity is expected to remain stable at least into late 2022 and perhaps into early 2023, with supply chain problems looming as a wildcard.

CBRE believes investment in the industrial sector “will stay hot in 2022,” with investment volume projected to climb 10% to 15% for the year. The company foresees 2022 being “another banner year” for the industrial sector.


Self-storage joined multifamily and industrial in enjoying a pandemic boost, as self-storage occupancy and rental rates reached record highs in 2021.

Helping drive the demand is the millions of Americans making room for work-from-home setups and the millions of Americans who left urban living to move back into their parents’ houses during the pandemic, according to The New York Times.

Nationally, self-storage asking rents in the third quarter of 2021 were 20.1% above the same period in 2020, according to Cushman & Wakefield. Self-storage deal volume surpassed $4.9 billion in the first half of 2021 and is on track to exceed $8 billion this year, according to the Crexi commercial real estate marketplace.

Yardi Matrix, a provider of commercial real estate data and research, noted that the self-storage sector in particular is experiencing a strong surge from the domestic migration to the Sun Belt markets. The highest self-storage rent growth for the year was recorded in Tampa, Fla.; Miami; Atlanta; Phoenix; Austin, Texas; Charlotte, N.C.; and Charleston, S.C. The strength of the multifamily market in the Sun Belt region is expected to continue fueling growth for self-storage, according to Yardi.

Retail, Office, and Hospitality

Battered by pandemic shutdowns, the retail, office and hospitality sectors remain in recovery mode.

The pandemic accelerated already existing retail trends toward more online shopping and less in-person shopping, and further called into question the decline of the mall.

Still, retail storefronts are surviving, for the most part. And open-air shopping centers, often anchored by grocery stores and other essential retailers, have thrived amid the pandemic. Grocery-anchored centers attracted $5 billion in U.S. investments in the third quarter of 2021, the segment’s second most active quarter in the past decade, CBRE reported.

Ultimately, the retail industry “is recovering relatively well from the pandemic’s major disruptions,” CBRE noted, and an anticipated rise in consumer spending in 2022 bodes well for the sector. CBRE forecasts a 5% to 10% increase in retail investment volume in 2022.

In the office sector, remote work continues to be popular, causing landlords in 2021 to ponder long-term changes based on tenants’ shifting needs.

“Demand for office space will improve as more workers return to the office and occupiers take advantage of favorable market conditions. The shift to hybrid work will prompt more occupiers to redesign their spaces to enhance collaboration and employee well-being,” according to CBRE.

Commercial real estate services provider JLL reported that office leasing volume rose 7.8% in the third quarter of 2021, approaching 40 million square feet for the first time since the start of the pandemic. As a result, transaction volume inched up 1.7% in the third quarter of 2021 compared with the same time in 2020, according to JLL. However, transaction volume sat 43.8% below 2019’s result.

JLL noted that lower-cost secondary markets in the Sun Belt and the West dominated office leasing in the third quarter of 2021, recording 18.7% growth in leasing compared with a 7.5% rise in gateway markets, in part due to looser business regulations and corporate movement to affordable locations. CBRE predicts office investment volume will increase 5% to 10% in 2022 compared with 2021.

Finally, the hospitality sector is still struggling, as leisure travel has mostly recovered but international and business travel has yet to rebound.

For the final week of November 2021, hotel occupancy was up 4.6% compared with the same week in 2019, while the average daily rate (ADR) was up 14.3% and revenue per available room (RevPAR) was up 19.6%, according to data provider STR Global. However, hard-hit markets like San Francisco and New York City continue to lag, with RevPAR down more than 50% in 2021 compared with 2019, according to CBRE.

Lodging Analytics Research & Consulting predicts U.S. RevPAR will jump 49.9% for 2021 and hotel values will increase 19.5%, while ADR will recover to 2019 levels by the end of 2022.

Compared with 2019, the top-performing markets for RevPAR growth in 2021 are Norfolk, Virginia; Miami; Tampa, Fla.; Phoenix; and San Diego, the analytics firm indicated. At the other end of the spectrum are the international-traveler and business-traveler magnets of San Francisco, Boston, New York City, Seattle and Washington, D.C.

Lodging Analytics Research & Consulting explained that “markets with a greater concentration of hotel demand from the leisure segments and less from international and in-house groups are likely to recover relatively faster.”

While lingering effects from the COVID-19 pandemic continued to drag on the hotel, retail, and office sectors, the multifamily, self-storage, and industrial sectors led the way for the commercial real estate industry in 2021. Each of the strong performing sectors showed resiliency in the face of the pandemic and benefited from the resurgence of the economy, with bright prospects for the coming year.

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