Business Real Estate Trends in North America

From the epidemic in 2020 to geopolitical and financial shocks in 2022, the world economy is always changing. Globally, economists predict a recession; they mostly discuss on when it will start, how long it will last, and the degree of its influence.

Commercial real estate is not free from the events and global economy. 

Covid-19 showed how even the best players might be influenced by world events. The epidemic caused Nike's sales to decrease 4% in 2020, proving that even leaders had to take fast action considering market conditions. This post aims to clarify the commercial real estate situation for the next years as well as for 2024. By means of striking examples from many companies and brands, we hope you will join us in exploring market trends, how to overcome challenges, and seize fresh chances. Before including our in-field knowledge acquired by working with the biggest stores worldwide to this post, we investigated and assessed several commercial real estate papers and studies. Working at Nakisa, Nakisa clients, and having produced CRE trend reports and surveys, all commercial real estate professionals—that is, those employed at Nakisa— believe that these trends are now influencing the commercial real estate market. First commercial real estate trend: an erratic market The first CRE trend is shifting market dynamics and its difficulties Labor shortages, inflation, an energy crisis, and supply chain interruptions will be post-pandemic challenges the sector will encounter in 2024. The main element deciding the setting for commercial real estate in 2024 is the volatility of the global market.  Players in commercial real estate use prudence and negotiate a period of price discovery in an unpredictable market. Respondents of PwC claim that tougher borrowing criteria imposed by lenders have increased financing expenses. This makes it challenging for businesses to get capital and carry out their ideas forward. This has reduced the need for agreements during price discovery, therefore underlining some real estate assets' vulnerability. Colliers' 2023 study, meantime, forecasts problems across all asset kinds. 

Companies apply different strategies to cope with market volatility. 

A few of them significantly less their real estate footprint. For instance, Meta chooses to sublease Bellevue and Seattle offices instead of occupy them. Microsoft also said they will be operating remotely rather than extending their Bellevue headquarters contract beyond June 2024. Some companies, like Nordstrom, which leaves Canada even though their Vancouver store was ranked as the best-performing in the world, may choose to leave particular markets. Others companies want to take advantage of opportunities. Psycho Bunny, for instance, will join the Canadian market in 2023 after tripling its business and opening 20 stores all throughout the United States during the pandemic, thereby reflecting amazing success. Plans are for Uniqlo to open 20 to 30 new stores in North America annually until 2027, therefore indicating substantial growth. Over the next five years, the North Face also plans to open around 70 locations in North America and accumulate almost 300 retail and partner sites. For your business, what is the best real estate approach? pause, shrink, or enlarge? You have to track market trends and base business decisions on data from your headquarters and stores to address these issues. It is clear what we may say: transformations are due. Both big and small businesses have to change their approaches to meet fresh challenges; the real estate profile is absolutely important in the strategy. Companies have to look for new, unusual ideas during this erratic event. Appropriate resilience and cost control are given by smart real estate management.

One should learn from past crises and recession. 

Organizations that were able to quickly adopt fresh approaches and rethink their real estate strategy would gain from new possibilities and keep ahead of the curve of global changes when COVID-19 struck. To adjust to the change, restaurants were establishing cloud kitchens or ghost kitchens and food delivery services; retail was moving to online buying; office workers were choosing remote work. These developments still shape the direction of the sectors even following the outbreak. Our research analysts believe that the following are the main major trends influencing the North American Office Real Estate major:  Rental rates for offices rising The North American office market has been greatly affected by the epidemic. With notable increase in North America's office absorption rate, the market is now healing. Moreover, office space rental prices are increasing after the epidemic crisis. Moreover, Class A office buildings show rather high rental increase. About USD 41.63 per square foot, US Class A office space rent in the fourth quarter of 2021 is 1.15 times higher than that of other office spaces. Class A office space rent in Canada, meantime, was CAD 23.62 per square foot in the third quarter of 2021. In the United States, the whole office space market is expanding steadily at a reasonable pace. With over USD 44.16 per square foot in Q4 2021, up 2% from the same quarter in 2020, the Northeast leads in rental growth in the nation followed by the West, South, and Midwest areas. In Canada, Vancouver and Waterloo respectively reported rental increases of 12% and 11.1% respectively. Source: North America Office Realty Market / Industry Reports / Market Trends