Despite rising interest rates—with the potential for more hikes in the coming months—commercial real estate has seen success in 2022. Although the forecast varies among asset classes, the overall industry outlook remains positive heading into the second half of the year. 

Retail properties

• Strip malls in densely populated residential areas are doing well. Grocery stores, salons, fast-casual restaurants and other retailers offering in-person services are critical to the strong performance. As retail evolves, walk-in MRIs, COVID-19 testing clinics, medical providers and other tenants outside traditional retail categories may fill more shopping centers. 
• Class B and C malls continue to struggle. They may be prime candidates for adaptive reuse. Their locations and proximity to parking could be used for the development of market-rate and affordable housing. Many of these malls also have dock doors and clear heights compatible with industrial use, so they can be ideal for warehouses and fulfillment centers.

What’s ahead for commercial real estate?

Multifamily and industrial properties have thrived in 2022. With healthy balance sheets, consumer demand could bolster retail, multifamily and industrial asset classes. Neighborhood retail in well-populated areas that offer in-person services has also done well. As the country navigates hybrid work, we’ll gain a clearer picture of how to best use office space. Keep an eye on interest rate hikes, supply chain issues and geopolitical events as well as ongoing relationships between public and private entities in affordable housing.