Which Pandemic Changes are Temporary, Which are Here to Stay?
December 15, 2021 | Calvin Schnure | Nareit
The coming year is likely to see significant further improvement in overall economic conditions, with rising GDP, job growth, and higher incomes, in a supportive financial market environment where inflation pressures gradually subside and long-term interest rates remain well below their historical norms. The emergence of the new Omicron variant of COVID-19 in late November 2021 serves as a reminder that the threat of new waves of infection looms over all aspects of the global economy. Increasing vaccination rates and natural immunity due to prior infection may help contain these risks.
Don’t expect commercial real estate markets or the rest of the economy to go back completely to the way they were before the pandemic, however. The pandemic was more than just a shock to aggregate demand. It also changed the way we live our lives, do our shopping, and conduct our businesses. Some of the changes may dissipate over time, while others are likely to be permanent. Nearly every sector of commercial real estate will be impacted one way or another.
As we assess the outlook for REITs and commercial real estate in 2022 and beyond, it is helpful to distinguish between these impermanent or cyclical effects and the longer-term structural changes that result from changes in behavior. The following sections first review REIT investment performance to date during the pandemic, and the outlook for economic activity and overall macroeconomic conditions. The final section considers how the pandemic has made deeper changes in how we live our lives and how this affects how we use commercial real estate.
