Dive Brief:
- Real estate markets have begun to rebound in 2021, although office and retail rental numbers are lagging behind multifamily and industrial growth, RCLCO Real Estate Advisors shared during a webinar Thursday.
- Additionally, the net operating income change for retail and apartment properties decreased by nearly 25% and 16%, respectively, to end 2020. The apartment market has the ability to reset itself more quickly, said Charles Hewlett, managing director at Bethesda, Maryland-based RCLCO. “A lot of this [NOI loss] was reducing rent to buy occupants,” he said.
- Hewlett also said he expects interest rates to remain low for the foreseeable future and noted that homeownership is on the rise and that issues with lumber prices continue to impact homebuilders and multifamily developers.
Dive Insight:
RCLCO expected to see lumber prices even out, Hewlett said, but they have continued to rise during the pandemic, along with the prices of other materials. Lumber futures nearly reached 175% of their April 2019 cost to start 2021.
Rising prices are putting a lot of pressure on homebuilders and developers, Hewlett told Construction Dive. When the pandemic began, there was uncertainty about how long it would last, but most projects take long enough to underwrite and plan that they soldiered ahead, Hewlett said. It is easier for work on long-term projects to continue, he pointed out, as contractors look to the future.
A large amount of uncertainty for the future stems from jobs, as employment numbers start to creep back up to pre-pandemic numbers. Despite the 6.2% unemployment rate as of February, a stat lower than prior recessions, William Maher, director of research and strategy for RCLCO, said the country may be underemployed. This could be connected to gig workers and those who left the workforce.
Those with office jobs are still also largely working from home, Hewlett said. The number of in-person office workers has remained largely unchanged since the onset of the pandemic. As a whole, U.S. companies have seen only about 30% of workers come into the office since March 2020.
