With the entirety of 2021 now in the books, it’s safe to say that the U.S. commercial real estate market left recovery mode last year and firmly entered a certifiable boom period.
Case in point: According to a fourth-quarter 2021 report from Real Capital Analytics (RCA), nationwide commercial deal volume for full-year 2021 was up a whopping 88% year over year to reach a level normally associated with global, rather than national, activity. Some $808.7 billion in commercial real estate transactions was seen over the 12-month period as optimism regarding new income growth in some sectors joined the stable, resilient yields generated by other asset classes in whipping up a veritable yearlong flurry of movement.
The fourth quarter alone was a strong one, with a 97% annualized gain in transaction volume that pushed the three-month level of deals to $325.1 billion, according to RCA. Even compared to the pre-pandemic fourth quarter of 2019, deal volume in Q4 2021 came out 80% ahead.
Multifamily housing was the most active sector of 2021 by a wide margin, comprising 42% of all transaction activity. Last year saw the continuation of a sea change in the sector. As the pandemic and the ensuing rise of remote work pushed migration patterns toward suburbs, exurbs and smaller markets, investors and developers followed suit. Properties in these markets represented roughly 80% of all deal activity last year, up substantially from about 60% in years past.
The industrial sector also had a strong year and was second among asset classes with 21% of all 2021 investment activity. Notably, whereas singular, entity-level sales have sometimes dominated the industrial market in previous years, this was not the case in 2021. Instead, investor attentions were broader across the board as supply chains readjusted to new distribution norms brought about by pandemic-era consumer patterns and the continued rise of e-commerce.
That’s not to say that entity-level deals were down across the board. In fact, entity-level sales, which were up an astounding 128% from 2020, grew faster year over year than single-asset sales did, with the latter up 83%. But single-asset sales also found new life in 2021 as investor interest in commercial properties soared in virtually every sector. In fact, at $573.4 billion in deal volume, individual-asset activity in Q4 2021 alone rivaled the yearly pace of single-asset sales from 2011 to 2013, per RCA.