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Archives for September 2021

Q3 2021 Retail Market Report | Chicago Metro

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Retail Fundamentals Hold Steady as Chicago’s Economy Continues to Recover

  • Loosening restrictions aid retail demand. Chicago’s retail sector continues to recover following a temporary disruption caused by the pandemic.
  • Limited pipeline supports demand for existing floor plans. The minimal amount of recent completions in Chicago has aided the metro’s fundamental balance.

Investment Highlights

  • Sales activity in Chicago remained muted over the past four quarters, with transaction activity down 14 percent year over year and falling well below the metro average prior to the pandemic.
  • The average sale price in single-tenant properties remained flat over the past 12 months at $416 per square foot.
  • Uncertainty from the pandemic impacted deal flow in multi-tenant properties, falling over 30 percent over the last four quarters.
  • Private investors seeking lower entry costs and higher yields were particularly active in the metro’s Indiana submarket.

* Forecast; ** Through 2Q
Sources: CoStar Group, Inc.; Real Capital Analytics

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The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions sold for $1 million or greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Real Capital Analytics © Marcus & Millichap 2021 | www.MarcusMillichap.com

Which Property Types Were Most Impacted by Covid-19

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Which Property Types Were Most Impacted by Covid-19

Hotels Saw Summer Surge, But Recovery Bifurcated

  • July Hotel occupancy was 69.6%, up from 47.1% last year but below 2019; daily room rates 6% above July 2019
  • Drivable resort destinations and Hotels along highways recovering faster than those catering to business travelers
  • Hotel investors foresee solid recovery; 47% view now as a good time to buy hotels, strongest sentiment since 2012

Seniors Housing Poised for Strong Comeback

  • While Seniors Housing saw a modest rise in occupancy in 2Q 2021, the vaccine provides an optimistic outlook
  • 76% of investors anticipate values to rise by 7.5% in the next year, and 67% think it is a good time to buy

Large Amount of Uncertainty Remains

  • Delta variant surge hampered Retail and Office recovery
  • Only 17% of Retail investors see now as good time to buy as sit-down restaurants and indoor malls face headwinds
  • Majority of Office investors believe now is a good time to hold as companies continue to delay return to office

As of 2H 2021
Base: All respondents; bases vary by property type currently invested in.
Sources: Marcus & Millichap Research Services, M&M/WMRE Investor Survey

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Which CRE Property Types are Outperforming?

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The Three Property Types That Outperformed In The Pandemic

Demographic Trends Support Strong Apartment Outlook

  • Post-lockdown job recovery and household unbundling led to record 218K Apartment units leased in 2Q 2021
  • U.S. vacancy fell to 3.8% despite elevated construction
  • Majority of investors expect 6.7% value gain over next year, driven by positive demographics and job growth

Pandemic Behaviors Bolstered Industrial Performance

  • Retailers focus on “just in case” inventory and reliance on eCommerce boosted Industrial demand
  • Amid 5 years of outsized construction, vacancies remain tight at 5% in 2Q; rent growth picked up to +5.9% Y-O-Y
  • Industrial investors remain optimistic: 74% anticipate average 7.4% price growth in the next year

Disruption of Normal Life Creates Need for Storage

  • College students back at home and need for home office space, pushed Self-Storage vacancy to 5.5%
  • Values expected to rise 6.3% as recession-resistant nature of Self-Storage likely to new investors to the sector

*As of 2H 2021
Base: All respondents; bases vary by property type currently invested in.
Sources: Marcus & Millichap Research Services, M&M/WMRE Investor Survey

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Employment Research Brief | September 2021

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Delta Variant Stalls Service-Related Hiring; Rising Wages Pose New Challenges

  • Health concerns slowed hiring last month. Job creation declined substantially in August as 235,000 positions were added, down from the 1.05 million personnel brought on in July.
  • Hotels add fewer jobs as summer comes to a close. Up 16 percent so far this year, the leisure and hospitality sector did not grow in August.
  • Industrial sector labor needs reflect current economic state. The addition of 40,000 messenger and warehousing jobs along with 11,000 air transportation positions have lifted the transportation and warehousing sector staff count to above the pre-pandemic level.

Developing Trends:

  • Wage pressures mount in August. While the employment base remains 3.5 percent below the pre-pandemic level, elevated job openings signal a persistent labor shortage.
  • Less hiring, higher pay complicate Fed outlook. The slowdown in hiring may prompt the Federal Reserve to delay updates to its current policies.

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