CBRE predicts 20% reduction in total U.S. retail square footage by 2025

The year 2021 will see a strengthened recovery of all U.S. commercial real estate sectors as the broader economy bounces back from the pandemic-induced recession. 

That’s according to CBRE’s 2021 U.S. Real Estate Market Outlook, which forecasts that retail, hotels and hotels will begin a slow recovery next year. Meanwhile, industrial and logistics real estate and data centers will extend an early rapid recovery that is already underway.

All sectors will benefit from the widespread availability of a vaccine, according to CBRE, a prospect that was enhanced by Pfizer’s Nov. 9 announcement of a treatment that it says proved 90% effective in preliminary trials.

In the retail sector, sales from brick-and-mortar stores will recover as economies reopen amid the eventual widespread availability of a vaccine and may even surprise on the upside on the back of post-COVID relief and pent up demand. Still, CBRE predicts a 20% reduction in total U.S. retail square footage by 2025 from the current 56 sq. ft. per capita.  Innovative private capital will lead investment in retail real estate while institutional capital will continue to pull back.

CBRE expects interest rates will remain low, even as GDP rebounds by 4.5% next year. The spending plans of President-Elect Joe Biden will be moderated if the GOP retains control of the Senate after two run-off elections in Georgia in early January. Elsewhere, the President-Elect’s plans could result in increased demand for health-care real estate and for properties tied to infrastructure and research and development.

Overall, CBRE expects the real estate recovery, particularly the office sector, to lag the broader economic recovery by several quarters.

“This follows the pattern of previous cycles but with the added complication of getting people back into the workplace,” said Richard Barkham, CBRE global chief economist and head of Americas research. “Two factors are essential for this recovery to take hold: a medical resolution to COVID-19 through a vaccine and other measures, and another fiscal stimulus package.”

To download the full report, click here.