CRE: What to Expect in 2022

Downtown Indianapolis

There is a lot in common between Commercial Real Estate in 2021 and the 2021-2022 Cincinnati Bengals (a timely comparison, as of this writing they are headed to Super Bowl LVI after an extraordinary comeback against the Kansas City Chiefs). Both had record comeback years, after a disappointing previous season marred by the beginning of the pandemic and a torn ACL (though it remains to be seen how much Joe Burrow’s torn ligament affected the economy). 2021 saw a record $809 billion year in commercial-property sales[1], a remarkable turnaround from the previous year. 2021 also saw the Bengals go from last place in the AFC North the previous year to AFC North champions, similarly a remarkable turnaround from the previous year. As we head into 2022, it remains to be seen whether the comparison will continue. Will CRE have another outstanding year? Will the Bengals win the Super Bowl a year after being 4-11-1? Luckily for Cinci fans, CRE is projected to continue its strong performance; so as far as this analogy is concerned, it looks like the Bengals are on their way to their first ring in franchise history.

We are only a month into the new year and have already been on a wild market ride. The stock market has seen extreme volatility, with both the S&P and NASDAQ entering correction territory at one time or another. Cryptocurrency is also struggling, with some coins seeing daily spikes in the hundreds of percentage points. This volatility, as well as a general concern that the market has entered long-term correction territory, is likely to shift some investment towards commercial real estate, where market volatility and changing interest rates have less of an effect (the expected rise in interest rates has much more of an impact on the stock market than on real estate investment). Stable cash flows and pent-up demand – signs of a healthy economy – alleviate fears and instill confidence in longer-term real estate investment.

2022 is shaping up to be a 2021 pt. 2. The same factors are going to affect CRE and the economy as a whole, but the degree to which each will have an impact has changed. Labor shortages, supply disruption, and inflation will all continue to play a role, albeit a smaller one. Dan Spiegel, Senior Vice President and Managing Director of Coldwell Banker is bullish on real estate in 2022, anticipates a continuation of the strong 2021 market across all sectors,[2] with some uncertainty about office and hospitality as the Omicron variant continues its surge. Big market investors are seeking returns in atypical markets; an investor in California may not find what they are looking for locally and must expand their search both geographically and in property type. Overall, this shift from primary markets to secondary and tertiary markets will continue to have a long-term impact on the distribution of commercial investment across the nation. This is particularly relevant for our markets, as the Midwest has been a prime target of investment, especially for industrial/logistics. “Everything’s lining up for another strong year.” remarks Carly Tripp, head of real-estate investments for Nuveen,[3] and from what we have seen so far, this seems to be the case.

The office sector is the black sheep of the group; not because the future is bleak but rather there is still uncertainty surrounding the trajectory of office leases in big cities. The Omicron wave has put off return-to-office dates for many companies indefinitely.[4] This does not just affect a single age group, either. Older employees may relocate to suburbs or smaller, family-friendly markets, as they focus more on retirement than career advancement. Recent college graduates, too, may elect to remain in their hometowns to save money and avoid the high cost of living in big cities. The pandemic aside, many companies are realizing that WFH is effective, and are becoming accustomed to the new hybrid model of work. Even with many employees working from home, companies want to maintain a physical footprint in cities; there is still good velocity of lease deals occurring across markets. Demand for office space in secondary and tertiary markets especially has continued to be strong as pandemic-fueled demographic trends shift where companies do business.[5] The high-inventory office market continues to be in the occupier’s favor, allowing them to negotiate favorable lease terms. In 2022, expect the office sector to continue its recovery with decent deal velocity, but high inventory. One trend to watch out for will be the adaptive reuse of office space into residential units, as owners seek creative solutions to convert their assets into profitable ventures.

The retail sector will remain strong, but different. The effects of the pandemic will be realized in longer-term price adjustments as companies shift some of the cost of increased wages and production to the consumer.[6] Consumer demand for retail goods didn’t decrease, but how we expect to get our goods did. The major shift towards ecommerce means a bigger emphasis on distribution centers at the expense of traditional retail properties (think: big box store closures). Now that the restaurant industry is on its feet and has time to adjust, expect a change in the physical makeup of restaurant properties to accommodate take-out/delivery services that are becoming more and more prevalent. Properties divided into traditional dine-in and carry-out only sections will become increasingly common.[7]

Industrial will continue its strong performance, bolstered by the massive investments made into logistics and distribution centers. The market is seeing an uptick in land sales in secondary/tertiary markets, slated for development. The secondary and tertiary markets overall are the place to watch for 2022 as logistical and industrial development continue. If 2021 was a year of adjusting to the new industrial landscape, 2022 will be the year where development gets firmly underway. Dan Spiegel identifies two major trends that we will see this year that we probably would not have seen otherwise: build-to-rent facilities and the large facilities being developed in secondary/tertiary markets.[8] Without the effects of the pandemic, the industrial market wouldn’t have seen such heightened activity, and the smaller markets certainly wouldn’t have gotten as much investment and development. High land prices and demand will be something to keep an eye on this year; land activity is experiencing record levels.

2022 is looking strong for CRE and, barring any world-changing events (knock on wood), should see continued recovery across the sectors, as well as some new activity both in property type and geographic area. And keep an eye on the Bengals, to see just how far this analogy goes.


[1] Covid-19 Fuels Best-Ever Commercial Real-Estate Sales – WSJ

[2] Episode 67: What to Expect From CRE in 2022 | WMRE Common Area (

[3] Covid-19 Fuels Best-Ever Commercial Real-Estate Sales – WSJ

[4] Surging Covid-19 Puts an End to Projected Return-to-Office Dates – WSJ

[5] Episode 67: What to Expect From CRE in 2022 | WMRE Common Area (

[6] U.S. Real Estate Market Outlook 2022 | CBRE

[7] Episode 67: What to Expect From CRE in 2022 | WMRE Common Area (

[8] Episode 67: What to Expect From CRE in 2022 | WMRE Common Area (

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