Economists' Outlook

Housing stats and analysis from NAR's research experts.

Land and Industrial: Brightest Spots for Commercial Real Estate

The 2020 Q4 Commercial Real Estate Quarterly Market Survey of REALTORS® reveals that the commercial real estate market continues to struggle, but some sectors are holding up relatively well against the economic effects of the pandemic. Sales and leasing of land and industrial properties increased, while hotels, retail, and office properties declined. The survey results are reported in the January 2021 Commercial Market Trends and Outlook Report.

Sales of land and industrial properties increase while other property types decline

REALTORS® reported that sales acquisitions declined for all property types except for land and industrial properties. REALTORS® reported that their sales transactions volume in the fourth quarter contracted on average by 2% year-over-over. NAR commercial members’ transactions are typically below $2.5 million (small commercial market). Among transactions of at least $2.5 million, Real Capital Analytics reported that sales declined 56% year-over-year.

By property type, REALTORS® reported the strongest increase in sales transactions for land, at 3%, followed by sales/acquisitions of industrial properties which rose 1%. Among land transactions, the largest gains were in sales of recreational land (e.g. for camping), ranches, and residential land. This could be related to increased interest in land outside urban centers in the wake of the COVID-19 pandemic.

With 46% of businesses in food services and accommodation reporting they are only operating at half-capacity compared to one year ago1, REALTORS® reported an average decline of 5% in their sales transactions of hotel/hospitality properties. And with about 25% of the workforce still working from home2, sales transactions of REALTORS® for office and apartment properties were down 1% to 2%.

Bar chart: Year-Over-Year Change in Land Sales, Q4 2020, by Property Type

Leasing activity for industrial properties increase while office and apartment leasing decline

REALTORS® reported that leasing activity has declined for all property types, except for industrial properties which increased by 1%. The demand for industrial space has been spurred by sales from rising demand for electronic shopping, with retail sales up by 23% in 2020 from 2019 (about $163 billion more).

However, leasing transactions declined for apartments (-1%) and office buildings (-1%); with one in five workers still working from home, there has been a slower demand for apartment and office leases.

Bar chart: Year-Over-Year Change in Leasing Volume Transactions, Q4 2020, by Property Type

On an aggregate basis, the industrial sector is sustaining leasing activity in 2020, with increases in net occupancy making up for the decline in net occupancy losses in the office sector. On a net basis, 268 million of industrial space became occupied in 2020 compared to 2019, offsetting the loss of 98 million square feet of office space that was vacated in 2020.

Bar chart: Net Absorption of Industrial and Office Space in Million Square Feet, 2012 to 2020

Positive sales outlook for industrial, apartment, and land sales in 2021 Q1

In this next three months, REALTORS® expect sales to increase for industrial properties, apartment, and land. Demand for hotels, retails, and office properties are still expected to decline with the risk of COVID-19 infection still present until the vaccine is widely distributed to achieve herd immunity. President Biden's plan is to deliver 100 million vaccine shots in 100 days, which is about 30% of the population.  Studies show that 70% of the population needs to be vaccinated to achieve herd immunity.

Bar chart: Commercial Sales Volume in Q1 2021 Compared to Q1 2020

1 Source: US Census Bureau Business Pulse Survey, week of January 9, 2021 survey, downloaded from Haver Analytics

2 Source: US Bureau of Labor Statistics, December 2020 COVID Supplement survey,