The commercial real estate market experiences trends just like other industries. The following article covers three important trends that emerged between 2010 and 2020. Other events also shaped the market, but these three changes stand out as incredible trends that made an impact on commercial real estate during the 2010s.
The Cannabis Real Estate Industry Boomed!
When California became the first state to legalize medical cannabis in 1996, it started a trend that would influence real estate prices in more than half of the country’s states. By 2021, 36 states and Washington, D.C. had medical cannabis laws. Fifteen states and Washington, D.C. had recreational cannabis that adults could purchase legally through dispensaries.
As more states legalized marijuana to some extent, companies invested in retail space, warehouses, and farmland. According to the National Association of Realtors, states that have had legalized cannabis for at least three years have seen increased demand for commercial property. The statistics show that:
- 42 percent of states experienced increased demand for warehouses
- 27 percent experienced an increased demand for storefronts
- 21 percent saw an increased demand for land
The cannabis industry also had an influence on residential real estate values. Interestingly, 27 percent of states saw decreases in residential real estate values near dispensaries, while 12 percent saw increases.
Up to 67 percent of landlords added non-smoking clauses to their leases in locations near dispensaries. It’s impossible to know, however, whether the increased smoking restrictions are the result of looser cannabis laws or the persistent decline in cigarette smoking. Regardless, over the decade, more property managers insisted that tenants refrain from smoking indoors. Those who chose to smoke despite the rules were often subject to stiff fines. Many lost their deposits so property owners could remove the lingering smell of smoke from carpets, drapes, and furniture.
Shared Workspaces Became Incredibly Popular—Then Practically Disappeared
The number of freelance workers grew significantly during the 2010s, potentially as a result of employees losing their jobs during the Great Recession and deciding that they didn’t want to rejoin the typical workforce. By 2020, the U.S. had about 59 million freelance workers, accounting for 36 percent of the total workforce.
Some independent contractors drove cars and delivered food. Many of them, however, provided professional services that required access to office spaces. The majority of freelance workers cannot afford to rent office suites. The market created a solution to this problem: shared workspaces with access to printers, conference rooms, and IT maintenance.
If you have never used a shared workspace, you might assume that COVID-19 made them irrelevant by encouraging independent contractors to work from home instead of gathering in places where they could spread the virus.
But the decrease in shared workspaces actually started years before the pandemic. The company WeWork, which has become synonymous with the shared workspace trend, shows how the idea became popular and crashed within a rather short period.
Between January and March 9, 2016, WeWork’s valuation jumped from $10 billion to $16 billion. In 2017, it reached a value of $20 billion. While still raising money in 2018, the company failed to expand into China. By the summer of 2019, the company had lost so much of its popularity that its founders started liquidating assets to stay afloat. The company went public to raise more capital but soon laid off nearly 20 percent of its global workforce.
The company limped along during 2020 but lost the small gains it had made in the Asian market.
Coworking spaces made sense for a few years. It seems unlikely that WeWork or similar companies will invest any more in the concept anytime soon, though.
COVID-19 Created a Wide Gap in the Commercial Real Estate Market
COVID-19 disrupted many industries by forcing people to stay home and limiting the access consumers had to products. Travel practically disappeared for most of 2020. As unemployment levels increased and government checks dried up, people struggled to pay for basic needs, including rent.
Interestingly, COVID-19 didn’t damage the entire commercial real estate market. It even contributed to one sector’s success.
When states entered periods of lockdown in March 2020, most commercial real estate markets plummeted. Before the end of the year, retail real estate had lost more than 10 percent of its value. Office spaces fell by about 5 percent. Apartments did slightly better than office rentals but still lost about 4 percent of their value.
The industrial sector, however, began to surge. From the beginning of 2020 to the beginning of 2021, industrial real estate’s value increased by about 5 percent. Projections show that it will likely take three more years for retail locations to regain their pre-COVID values. By that time, industrial real estate should have grown by more than 20 percent.
Join ProspectNow to Stay Ahead of Commercial Real Estate Market Trends
Obviously, trends in the commercial real estate market come and go quickly. ProspectNow uses predictive analytics to help you stay ahead of industry trends.
ProspectNow has been helping real estate investors make informed decisions since 2008. Today, the tool uses information gathered from public documents and industry reports to predict which businesses will put their real estate on the market soon.
Predictive analytics gives you a head start so you can reach out to potential sellers before your competitors do. Making the first move could mean that you purchase commercial real estate at the lowest possible price, which helps ensure a return on your investment. It also helps the seller because most of them want to unload properties quickly to avoid loan payments and other expenses.
Request a demo of ProspectNow so you can see how the system works. In addition to predictive analytics, you can gain access to a database that lets you search and filter millions of commercial properties across the United States.