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The commercial real estate market is recovering, although commercial real estate transactions and the underlying market fundamentals are still weak compared to pre-pandemic conditions.

In the first quarter of 2021, commercial transactions were 28% below the level one year ago. Commercial real estate prices continue to firm up, but valuations were broadly down by 6% from one year ago.

In the first quarter, the dollar volume of acquisitions of $2.5 million or over fell in the office (-36%), retail (-42%), industrial (-41%), and multifamily (-12%) property markets. However, hotel acquisitions rose 13%. Investors could be acquiring some hotels to be converted into other uses, such as multifamily housing. NAR’s recently published report Case Studies on Repurposing Vacant Hotels/Motels into Multifamily Housing documents such conversions, based on information gathered from NAR commercial members and secondary research.

NAR Research anticipates that commercial transactions will pick up in the second half of 2021 and even more strongly in 2022, with the population practically vaccinated by the end of summer 2021, as more businesses increase their operating capacity, travel resumes, workers start heading back to the office, and consumers spend some of their savings on leisure and recreation and personal services.