Article
2 minute read 17 November 2021

2022 commercial real estate outlook

Economic, social, and digital disruptions combine to force a change in how CRE is developed, financed, and used

Jeffrey J. Smith

Jeffrey J. Smith

United States

Kathy Feucht

Kathy Feucht

United States

As we turn the corner on 2021, hopes that we would be doing the same on COVID-19 have stalled. The Delta variant has clouded the near-term outlook as vaccination, masking, and social distancing requirements have impacted commercial work and gathering facilities. The commercial real estate (CRE) industry is positioned at the forefront of the recovery: Office employers are balancing productivity and safety; retailers face critical turning points in an evolving industry; residences are competing for tenancy amid shifting migration patterns and heightened affordability concerns. Meanwhile, companies face increasing demands to prioritize environmental, social, and governance (ESG) issues, aging technology infrastructures, a tightening labor market, and increasingly differentiated competition. How the CRE industry proceeds into early 2022 could set the foundation for its success over the next several years.

Here are the key findings from Deloitte’s 2022 commercial real estate outlook:

Despite some financial concerns and an evolving regulatory environment, optimism around fundamentals prevails. Eighty percent of respondents expect their institution’s revenues in 2022 to be slightly or significantly better than 2021 levels.

Most firms continue to depend on legacy technology systems, which could hamper progress and their ability to innovate. Eight in 10 respondents do not have a fully modernized core system that could easily incorporate emerging technologies.

Many CRE firms are focusing on retrofitting properties and repurposing spaces for alternate uses to maximize value. However, only one-quarter of respondents say their companies are substantially increasing technology investments to bolster portfolio and asset management capabilities.

Sustainable properties are often key to a better tenant experience; building partnerships to provide new offerings to tenants can also enable real-estate-as-a-service (REaaS). Over three-fourths of respondents say their companies will likely expand partnerships with or invest in proptechs, which could help firms deploy the REaaS delivery model.

As the CRE industry develops long-term, return-to-work strategies, flexible working arrangements, organizational purpose, and demand for technology skills will shape the talent landscape. The tight labor market is bringing workforce issues to the forefront, such as well-being, ESG, and adopting a more individualized approach to where work gets done (remote/office/hybrid). Our survey indicates CRE employees want their firms to be more purpose-driven.

Most CRE companies are in the early stages of addressing climate risk; respondents indicated sustainability concerns, and the need to address them were priorities in this year’s survey. But in the wake of the pandemic and community demands for more equitable playing fields, CRE leaders should also prioritize social issues and diversity, equity, and inclusion (DE&I) initiatives. The CRE industry has a long way to go to achieve equitable representation.

After nearly two years of change not seen in many generations, the CRE industry is at an inflection point. Which way will it go?

Download the full 2022 commercial real estate outlook to learn more.

The authors wish to acknowledge Jay Bhuta, Tim Coy, Shreyans Gala and Taylor Rihl for their extensive contributions to the development of this report. We would also like to thank our colleagues Todd Bauer, Molly Cummings, John D’Angelo, Anthony DeAngelis, Nathan Florio, Lynn Kawaminami, Rob Massey, Mike Marzelli, Robin Offutt, Adam Regelbrugge, Brian Ruben, and Kristen Sullivan for their insights and guidance.

Cover Image by: Willy Sion

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Jeffrey J. Smith

Jeffrey J. Smith

Deloitte & Touche LLP

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