How’s the Market?
Every real estate agent hears this question asked in every setting. Commercial brokers are no exception. Our landlords want to know, “how’s the market” to determine how long they may be waiting for a tenant. Tenant’s want to know, “how’s the market” to determine what kind of deal they might be able to get on lease space. Seller’s need to know how long to expect their building to sit on the market and Buyers need to know how much competition is out there.
At the time of this article’s writing, May 2021, we all know that the residential market is hot. But what about the commercial market? Historically, the commercial real estate market trails the residential market by six to nine months. If that trend is to continue, we should expect a lot of activity this year in the commercial industry.
However, we are already seeing similar trends to what is happening in residential. The commercial real estate inventory is low. As of this writing, the local MLS has 89 commercial listings in McLean County. A couple of months ago that number was 134. Roughly half of those listings are commercial lease listings and the other half are properties listed for sale.
So, how’s the market? The commercial market can be drilled down to different asset classes: Office, Retail, Industrial, and Multi-Family. Bloomington/Normal is seeing the same trends that are occurring all across the United States right now in the Industrial sector, which is a lack of inventory and high demand. Weekly the Bloomington Normal Economic Development Council is receiving RFP’s looking for industrial properties, they don’t exist. There are tenants looking for spaces ranging from 5,000-40,000 SF of warehouse and we have very little inventory to meet that demand. If you have ever considered building a spec warehouse, now might be the time.
Multi-family investment has become very competitive and as soon as an apartment building hits the market, provided it is priced right, there is immediate activity, multiple showings and oftentimes multiple offers. We get endless requests from brokers and investors looking for off-market opportunities. There is a strong demand for this asset class and low inventory. If you are holding on to an asset and wonder if now is the right time to sell, it is.
Retail and Office. These two asset types are the most challenging in today’s marketplace. Covid has certainly affected the office and retail sectors more negatively than the housing and industrial markets. Retail has been in a transitional cycle for years now with a growing percentage of sales occurring online, this trend certainly took on an increased trajectory this year and struggling retailers struggled to keep up and many of them have closed in the secondary and tertiary markets. That does not mean there is no growth in retail. There are certain sectors within retail that have succeeded very well and adapted very quickly this past year and have plans for new stores (think dollar stores, discount stores, food with drive throughs, etc.).
And what about office? Well, this is the greatest unknown. We are still waiting to see what businesses plan to do with regards to keeping a physical office or going to full remote, downsizing to accommodate flexible work scheduling or upsizing to create more distance and more private offices. This next twelve months will be very telling to the future of the office market. Those that are looking, are taking advantage of cheap money and low interest rates and looking to purchase rather than lease. Will there be tenants in the future, of course; but time will tell what those tenants' needs will look like.
So, how’s the market? I have a positive outlook. We are a resilient community with a lot to offer from a quality of place, quality of life, low overall cost of living, great amenities and great base employment. So, the market is strong and there is great opportunity.