Markets in Focus

Real Estate Insurance Pricing + Market Update

Q2 2021

Markets in Focus | Real Estate |  Real Estate Q2 2021

2020 was a difficult year for the US commercial real estate industry, particularly for the office space sector, which, on average in the US, saw an 80 basis point increase in vacancy rates and no increases in rent year over year. Due to the COVID-19 global pandemic and resulting recession, the year was full of challenges for all segments in the real estate space: rising vacancy rates, reduced rents, employee temperature checks, mask requirements, halting of residential evictions, and declining financial health of tenants.

As of late, the sector has also been adversely impacted by a significant increase in construction costs due to shortages in labor, rising costs of raw materials, and delays due to global supply chain issues. This has resulted in shrinking margins and longer timelines on new projects. Moreover, most REITs were negatively impacted by declining rent payments and future investment projects becoming delayed or stalled. Though the residential and industrial sectors appear to be showing a little more resiliency in 2021, many (particularly in the office and retail sectors) are wondering how long the trends of remote working and vacancies as a result of financially impacted companies will linger into 2021.