From the Desk of Lorie Davis
January 20, 2022 | Lorie Davis
The commercial real estate (CRE) industry is beginning to make a strong comeback despite continuing uncertainty due to the pandemic and other factors.
The rate at which some industries financially recovered and have prepared for new opportunities looks different for various sectors and markets. In terms of buying new locations, increased rent collection and similar factors, we’re seeing the strongest comebacks within CRE for industrial/e-commerce warehousing, medical practices, grocery and pharmacy. Here’s a closer look at each.
According to CBRE, e-commerce accounts for almost 9% of all retail sales in the United States. It has also been growing exponentially faster than brick and mortar retail for over a decade. This transition means the modern warehouse must be designed and built to store a significant amount of goods and deliver them to the consumer quickly.
The uptick in warehousing needs is not confined to a few markets. It’s evident in almost all markets – large and small. Any businesses that use warehouses and are lacking sufficient modern logistics facilities have the potential to expand and improve to keep pace with this rising demand.
Medical practices were positioned for growth even before the pandemic due to the increasing age of our population, as well as the rise in routine medical visits and elective procedures. This industry is also currently seeing increases in pricing and sales transaction levels, positioning it for significant growth in the coming years.
Businesses in the medical practice space that are looking to expand should keep in mind the two key factors lenders will consider when making financing decisions are tenant quality – with a proven track record of financial responsibility – and the location of their practice.
Grocery and Pharmacy
The pandemic shined a light on how essential grocery stores and pharmacies are in our daily lives. These industries have become increasingly appealing to investors and lenders, especially since the properties occupied by grocery stores and pharmacies are typically tenants with long-term leases. In addition, both of these industries have shown they can evolve to meet online shopping and safety protocol demands, making them a safer long-term investment.
While grocery store and pharmacy sales performance has been universally strong, there are some differences between markets and individual grocers. Before expanding to new locations, it’s important to do thorough market research to identify potentially profitable opportunities.
While there are many more industries with promising CRE growth, industrial/e-commerce warehousing, medical practice, and grocery and pharmacy are clearly at the top of the list. As we turn the corner on 2021, the CRE industry as a whole is positioned for a successful new year and will be at the forefront of our economy’s recovery.
Lorie Davis currently serves as VP, Senior Commercial Relationship Manager, at Bankers Trust in Cedar Rapids. She joined Bankers Trust in 2019, bringing 40 years of banking experience.