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5 Real Estate Predictions for 2022

By Maurie Backman – Nov 27, 2021 at 8:36AM

Key Points

  • Malls could continue to struggle in 2022 as consumers favor online orders and big-box stores take shoppers away.
  • A more robust return-to-work effort could help office buildings recover, but probably not hotels.
  • Leisure travel could be a boon to the hospitality sector, but private rentals should continue to see strong demand.

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The coming year could be an interesting one, to say the least.

It's hard to believe that 2021 is almost over. But alas, here we are, and it's fair to say that it's been a very interesting year for real estate. As we head into 2022, here are some trends that real estate investors should know about.

1. Retailers will spend more on order fulfillment than new store locations

Though shopping malls were struggling before the pandemic, the past 20 months of the pandemic have dealt them a substantial blow. In the wake of the crisis, many retailers have declared bankruptcy and closed down stores, leaving mall operators with vacancies to fill.

In 2022, malls could face a similar challenge -- not because of retailer bankruptcies, but because more brands may opt to sink money into distribution and fulfillment centers and less into store renovations and openings. All of this fits into the e-commerce trend, which exploded during the pandemic and is apt to continue into the new year.

Large building courtyard.

Image source: Getty Images.

2. Big-box stores will drive more consumers away from malls

Big-box giants like Target (TGT -1.04%) have been getting increasingly creative at drawing in customers. Target specifically has become more of a mini-mall by opening different in-shop stores in an effort to broaden its customer base.

In the coming year, big-box retailers may take even more steps to draw in customers. And given their financial footing, they have the resources to do so. Malls could continue to struggle as these stores become an even more desirable shopping destination.

3. Office buildings will start getting fuller

Office buildings have largely sat vacant since the start of the pandemic. But with COVID-19 booster shots now available to the general public, offices are starting to slowly but surely bring workers in.

In 2022, there's a good chance companies will finally put an end to remote work and insist that employees show their faces at least a few days a week. Of course, some companies have already made the decision to let workers do their jobs remotely on a permanent basis. But for those not making that call, 2022 could be the year when a more robust office return ensues.

4. Leisure travel will carry hotels, while business travel will continue to lag

Given that we're at the end of 2021 and many companies still haven't brought workers back to offices, it's unlikely that business travel will really take off in 2022. That's something hotels will need to grapple with, and properties that commonly serve business travelers might face their share of vacancies and revenue concerns.

Meanwhile, leisure travel could spring some life into the hotel industry. That's good news for hospitality REIT investors after a miserable 2020 and a shaky 2021.

5. Short-term rental demand will continue to boom

While hotels should enjoy a decent stream of bookings in 2022, travelers may still be drawn to short-term rentals, where they can spread out and have a home all to themselves. This option may be particularly appealing to families with young children during the first part of the year.

As of now, children under the age of 5 aren't eligible for a COVID-19 vaccine. That could change early on in 2022, but it will take some time to get that part of the population inoculated. This means investors in short-term rentals could really benefit from continued demand.

Will 2022 be a solid year for real estate investors?

Only time will tell what the year will bring. But it'll be interesting to see how well these predictions pan out as a new year unfolds.

Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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