Commercial real estate in North America is a $10 trillion market, and it’s still growing, despite the economic impacts of COVID-19. In particular, niche real estate markets saw notable success.
Commercial real estate market analysis shows 2021 investing trends reflect the rest of the COVID-19 economy. That means some niches are winners, and some are losers. That’s why it’s more important than ever to consider the performance of the niche before investing.
Here are some niche markets that grew in 2021:
Warehousing and Logistics Real Estate
Logistics real estate, including warehouses and distribution centers, is one of the booming markets created by the global economic shift to e-commerce. As Covid-19 sped the growth of online shopping, the need for high-throughput modern logistics facilities has increased.
Online order fulfillment requires more space to accommodate greater product variety, deeper inventories, and per-order shipping requirements. Add international shipping delays, which leave stock sitting in warehouses longer, and it’s easy to see why demand is outstripping supply across the country.
Cold Storage Facilities
Cold storage has been a growing niche for commercial real estate investing for the past several years. Like warehousing, Covid-19 has increased demand. International shipping delays expanded import food inspections, and refrigerated container shortages are adding pressure.
The increased demand for cold storage facilities among grocery suppliers hasn’t slowed as we continue to eat at home. And new biologic medicines and vaccines are adding pressure from the pharmaceutical sector.
As a result, the global cold storage market is expected to exceed $18.5 billion by 2027. That’s a $7 billion jump since 2019—a 13.8% compound annual growth rate (CAGR).
Life Sciences
A decade of rapid growth in the life sciences industry shows no signs of slowing. Investments are up 93% since 2018. And 2021 is expected to set an investment record for the sector.
The pharmaceutical and biotech industries have led growth this year. But other sectors, including biomedical technologies, nutraceuticals, and cosmeceuticals, are also surging. The need for unique facilities—clean rooms, special ventilation, refrigeration, extra power, and generators is driving development.
Data Centers
Data centers provide the infrastructure we use to shop online, work remotely, and enjoy streaming entertainment. As demand for online services grows, the need for data centers grows with it.
Several demand sectors have driven growth. Those include:
- 25-30% increase in demand for Internet access
- Switch to a remote and hybrid workforce
- Expansion of the Internet of Things (IoT)
- Nationwide 5G deployment
- AI-based infrastructure solutions
The US data center market should reach about $104 billion by 2026 (3% CAGR).
Coworking and Flex Office Space
Covid-19 changed the way we work. Millions of us began working from home. Today, some are returning to the office, at least part-time.
Nearly 4.3 million Americans quit their jobs in August 2021. At the same time, there was a huge uptick in the number of new businesses formed, mainly sole proprietorships.
The shift to hybrid working and growth in new businesses have created a demand for new kinds of office space. New coworking and flex office space is being developed to meet demand, offering flexible floorplans and high-tech amenities at lower costs.
Self Storage Facilities
Market analysis indicates growth in the demand for self-storage. Increased urbanization with smaller, more expensive dwellings has created a greater need for offsite storage facilities.
New businesses drive increased demand too. Many home-based businesses lack adequate inventory storage facilities onsite.
Self-storage has become one of the niche markets experiencing substantial growth. The global self-storage sector is projected to reach $64.71 billion by 2026. That’s a CAGR of 5.45% over the next five years.
Niche Markets in Commercial Real Estate Investing
Commercial real estate investing can create wealth, especially if you focus on booming markets like these. Caldwell Commercial can help. Our commercial real estate experts understand these growing niche markets.
With a combined 80 years of experience, our team can help you build and manage a commercial real estate portfolio that meets your financial goals. Contact us today to get started.
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