It's fair to say that 2020 was an intense year in the world of real estate investing. Widespread store closures hurt retail, and office buildings largely sat vacant as remote work took over.
The current year hasn't been as brutal. Store closures have slowed down tremendously, and offices have started to see signs of life. Hotels, which also saw record low occupancy rates in 2020, have started to enjoy a revival, fueled by leisure travel.
In the coming year, real estate investors could face their share of wins and challenges. Here are a few things to know as 2022 approaches.
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1. Malls could continue to struggle as digital sales boom
Though consumers were increasingly shopping online before the COVID-19 outbreak, the pandemic fueled that trend even more. And while we don't have final numbers from this year's holiday shopping season, Deloitte predicts that online spending will well outpace in-store spending.
All of this means that malls could really struggle in the coming year. As more consumers opt to spend their money online, retailers may be forced to shutter store locations that don't see enough foot traffic to justify keeping them open. And that could leave malls with a major vacancy crisis on their hands.
2. Shopping centers could thrive as discount brands expand
While the pandemic may have fueled an uptick in store closures, one breed of store that hasn't fallen victim to that trend is discount retailers. In fact, brands like Dollar General (DG 0.21%) and Dollar Tree (DLTR -1.04%) announced major store expansion plans this year, and those could continue well into 2022.
The winners in that scenario? Shopping centers. That's because dollar stores have the potential to serve as anchor tenants -- and fill vacancies left over by the pandemic.
3. Demand for warehouses and fulfillment centers could explode even more
Digital shopping may be bad for physical retailers and malls -- but it's great for industrial REITs, or real estate investment trusts. In 2022, we could see sustained demand for warehousing and distribution center space as retailers expand their online footprint and sink resources into faster order fulfillment.
4. Data centers could remain hot
The pandemic spurred a major uptick in workers doing their jobs remotely. And while companies are starting to call workers back to the office, many will no doubt remain remote in 2022.
That, combined with a general push toward digital record-keeping, could make data center REITs a very wise investment in 2022. As companies grow increasingly tech-savvy, high-capacity data centers should remain in demand.
What will 2022 have in store for real estate investors?
In the absence of a crystal ball, it's hard to say how well real estate investors will fare in the new year. But based on the trends that have emerged since the start of the pandemic, there's a good chance 2022 will be another tough year for malls, a decent year for shopping centers, and a strong year for industrial space as well as data centers. Investors may want to tweak their portfolios accordingly.
