Joe Fairless has watched the market over the course of the pandemic and how it’s reacted to all the changes being made. What he sees as a consummate investor is how each new swing fits into a larger context of everything that’s come before it. As a commercial real estate pro and the creator of the Best Real Estate Investing Advice Ever podcast, he weighs in on what’s likely to come in 2022.
Multifamily on the Rise
Multifamily properties are an answer to a number of problems that people face today. Not only are they generally more affordable, but they’re also often a practical solution for people who aren’t ready for the full-time responsibilities that homeownership can bring. With people changing jobs and locations constantly, they’re often more concerned with amenities than they are with working out their lawn care schedule. Joe Fairless says that multifamily is going to continue to grow this year, based on recent trends and demand levels.
Secondary Cities Take Center Stage
Cities like New York and Los Angeles are difficult to break into, which is why markets in business-friendly states, like Arizona, Florida, Texas, and North Carolina are really starting to come on the radar. In 2022, cities like Tampa, Charlotte, and Phoenix might be some of the best places to focus on for commercial investors.
For any investor planning to focus on standard office buildings, Joe Fairless explains that there is a need to account for changing workforce dynamics. However, what he doesn’t see happening is offices dying out completely. What leaders likely are going to do is consolidate wherever they can. For instance, if they’re working on a 50:50 in-office to remote model, they won’t necessarily need space for all of their employees. This will increase demand for office buildings that boast flexibility.
He also points out that this is true of retail shops. While ordering online is certainly a popular way to get goods and services, people will always want a reason to go out to brick-and-mortar stores. From trying on clothes before buying to getting a haircut, the forecasted demise is largely overblown.
Joe Fairless on Construction Costs
It’s unclear when the supply chain — both in terms of labor and materials — will start to stabilize, but it seems clear that 2022 is unlikely to be the time. The rising costs of construction mean that existing assets will be given more consideration, which can be a good starting point for anyone who wants to get started in their investment journey.
Incentives for Housing the Missing Middle
Firefighters, teachers, municipal workers: these middle-class professionals are sometimes shut out of the housing market. This is one of the many reasons why multifamily housing is on the rise, but commercial real estate investors also need to think about how local, state, and federal governments are stepping into the situation.
Depending on the incentives being offered, commercial investors need to think through how each benefit will affect everything from rents to average home prices. Joe Fairless recommends that everyone should be aware of larger forces at work, both this year and beyond.