During the 2022 National Association of Realtors Legislative Meetings’ Commercial Economic Issues and Trends Forum, NAR Chief Economist Lawrence Yun addressed concerns over rising interest rates and the potential impact on the residential and commercial real estate markets. Despite what he calls the headwinds ahead, Sun expects the commercial market, in particular, to fair well.
“Outside of the office sector, which is lagging behind as employers allow increased remote work flexibility to keep and attract talent, commercial real estate continues to strengthen,” Yun said. “The industrial sector is booming, retail is turning positive, the hotel industry is recovering, apartments are doing very well, and rents are rising in all commercial sectors.”
With the current residential housing shortage, apartment rents are expected to keep rising by more than 10 percent over the next two years. industrial rents are likely to keep rising solidly in the next two years, while vacancy rates will remain below 5 percent.
“While the overall office market is wobbly, some variance exists depending on location,” Yun added. “We’ve seen improvement in some midsize markets as companies seek more affordable office locations away from major U.S. cities.”
Yun urged commercial investors to consider land development given the scarcity of developed residential lots that are essential to addressing the housing supply shortage. He also made an appeal to local governments to ease land zoning regulations and ordinances.