PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for 2022.
Commercial real estate transaction volume has resurged after a pandemic-induced pause in mid-2020. During the first nine months of the year, total volume is up 74% compared to the same period for 2020 and 10% compared to 2019. Most notably, hotel transaction volume is up 280% versus 2020 and even 13% versus 2019.
So what happened? Travel restrictions were lifted and leisure demand returned, thus reducing uncertainty. This led to investment activity returning to drive-to and resort destinations as well as the economy segment. Comparatively, while transaction volume in the office sector is up 45% compared to 2020, it remains 16% below 2019 levels. If the hospitality sector, likely the most impacted by the pandemic, is any barometer for investor activity, we can expect transaction volume in the office sector to return in 2022 as more companies return to work and there is more clarity on how office space will be used.
Separately, retail volumes, while up compared to 2020, are slightly down, albeit relatively flat, compared to 2019 as the sector continues to transform and work through unutilized space. Lastly, we expect transaction volume in the industrial and multifamily sectors to remain strong given the strong tailwinds of continued evolution in consumer trends and supply chain management as well as demographic shifts. Overall, the pace of activity is expected to continue, supported by low interest rates and attractive returns relative to risk.
“Our thesis that we would see increased capital allocated to alternative sectors, such as digital-infrastructure, has been proven and we expect this to continue moving forward.”
Real Estate Deals Leader, PwC US
Real Estate Acquisitions Leader, PwC US
Deals Partner, PwC US