It’s fair to say that 2020 has been a busy year in the real estate investing world. Widespread store closings hurt retailing, and office buildings remained largely vacant as remote working took over.
The current year has not been so brutal. Store closings have slowed considerably and offices have started to see signs of life. Hotels, which also saw record occupancy rates in 2020, have started to experience a revival, fueled by leisure travel.
In the coming year, real estate investors could face their share of victories and challenges. Here are a few things to know as we approach 2022.
1. Shopping malls may continue to struggle as digital sales explode
Although consumers were increasingly shopping online before the COVID-19 outbreak, the pandemic has further fueled this trend. And while we don’t have final numbers for this year’s holiday shopping season, Deloitte predicts that online spending will far exceed in-store spending.
All of this means that shopping centers could really struggle in the coming year. As more consumers choose to spend their money online, retailers may be forced to close stores that don’t see enough foot traffic to justify keeping them open. And that could leave malls with a major vacancy crisis on their hands.
2. Shopping malls could thrive as discount brands grow
While the pandemic may have led to an increase in store closings, discount retailers are one category of stores that has not fallen victim to this trend. Indeed, brands like General dollar (NYSE: DG) and Dollar tree (NASDAQ: DLTR) announced major store expansion plans this year, and these could continue until 2022.
The winners in this scenario? Shopping centers. That’s because dollar stores have the potential to serve as key tenants – and fill vacancies left by the pandemic.
3. The demand for warehouses and distribution centers could explode even more
Digital purchases can be bad for physical retailers and malls, but they’re great for industrial REITs or real estate investment trusts. In 2022, we could see sustained demand for warehouse and distribution center space as retailers expand their online footprint and dedicate resources to faster order fulfillment.
4. Data centers might stay hot
The pandemic has spurred a significant increase in the number of workers doing their work remotely. And as companies begin to recall workers back to the office, many will no doubt remain at bay in 2022.
That, combined with a general push towards digital record keeping, could make data center REITs a very worthwhile investment in 2022. As businesses become more tech savvy, large capacity data centers are expected to become more tech savvy. stay in demand.
What does 2022 have in store for real estate investors?
Without a crystal ball, it’s hard to say how far real estate investors will fare in the New Year. But based on the trends that have emerged since the start of the pandemic, there is a good chance that 2022 will be another tough year for malls, a decent year for malls, and a strong year for industrial spaces as well. than data centers. Investors may want to modify their portfolios accordingly.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.