The Five Trends That Defined Commercial Real Estate in 2021
With the sector still recovering from the massive disruption of 2020, 2021 was the first year of the ‘New Normal’ for commercial real estate. Now that the year is almost over it’s a valuable opportunity to reflect on the five biggest trends that shaped commercial real estate in 2021, and what these trends might mean for the year ahead. “Some of these trends emerged as a direct response to the challenges presented by the COVID-19 pandemic, but there were a few that surprised even industry insiders,” explains Galetti CEO John Jack. Below, John breaks down the five biggest trends that defined the sector in 2021:
1) REITS devised new strategies to stay on top
Real Estate Investment Trusts (REITs) came under increased pressure this year that resulted in them having to come up with new strategies to stay afloat. REITs are companies that own, operate or finance income-producing properties that need to maintain conservative debt levels to be considered an attractive investment – a challenge with many offices and retail centers standing empty.
“The singular most impactful strategy Galetti observed this year were REITs opting for asset disposal of properties previously thought locked away forever in the fund. Private buyers had an opportunity to acquire these prime assets. Another strategy was to offload stock held in offshore property businesses which was a key investment direction in the years prior. says John.
2) Companies returned to the office
When South Africa moved to the more relaxed Level 3 lockdown in June 2021, many companies began to prepare for their return to the office. Some workplaces opted for a hybrid approach, working some days remotely and others in the office. This approach marked the beginning of a more flexible approach to office space, a trend that defined this year and will likely continue in 2022.
“Offices are now used to install a sense of community and company culture rather than being merely functional,” says John. “We were pleased to see more companies return to the office in 2021 rather than continue to remote work, as they recognised the important role that in-person working plays in building a culture.”
3) Mixed-use developments became increasingly popular
2021 saw an increase in the number of mixed-use developments, which combine retail, residential and commercial all in one building. “The residential property market saw a boom this year, and developers looked to cash in on this trend by building mixed-use developments that attracted a new market.
4) Online auctions embraced
Galetti’s research estimates that in 2021, 5% of real estate sales in South Africa were transacted via online bidding platforms, a percentage we expect will grow in the next few years. “Online auctions originally spiked this year as a result of the pandemic, but they’re now seen as a simple and safe way to buy and sell property in the digital age,” adds John. Download Galetti’s Online Auction app here.
5) Industrial and self-storage were the clear winners
The self-storage revolution is a key player in the demand for industrial property which has witnessed incredible growth this year. “While the rest of the industry struggled to recoup tenant repayments in 2021, storage tenant payment performance outperformed all three major commercial property sectors and fought for prime locations as it expanded to meet demand,” says John.
This year Galetti partnered with leading company SpareSpace to bring short-term storage to the industrial market.
Galetti always has our finger on the pulse of what’s trending in the commercial real estate space. Contact one of our forward-thinking brokers to help you find your next commercial space: https://galetti.co.za/contact-us