The Green Street Commercial Property Price Index, which tracks prices in the US, rose 17% in the first half of 2021, overcoming 2020 losses to reach a level 8% above its level going into the pandemic. Also since the startof the pandemic, the industrial sector is up 41% and self storage is up 40%, but malls are down 13% and office is down 6%.1 The Green Street Pan-European Commercial Property Price Index report stated that over the last 12 months, the index was up 7.1%, with wide dispersion among the sectors; industrials were up 23.9%, while retail was down 1.2%.

Green Street reported in July that nonperforming commercial real estate debt had doubled on bank balance sheets, but the absolute level remains low.3 While disappointing to opportunistic purchasers, the withdrawal of government support as the pandemic winds down could cause these numbers to rise.

10-year sovereign debt yields continue to sit below 1%throughout much of the developed world, with the US and Australia being the major exceptions at 1.3% and 1.2%, respectively as of mid-September 2021. The US yield curve has steepened in the past year, with one-year-and-shorter yields dropping even closer to 0% but rising in the two-year-and-above maturities. The 10-year has seen a particularly sharp climb from 0.682% to 1.291% from September 15, 2020, to September 14, 2021. While a rise in longer-term yields has the potential to cool off some areas of real estate and depress potential returns, these rates are still extremely low from a historical perspective. Supply-and-demand dynamics are more powerful drivers as market participants work through the changes wrought throughout the economy by the pandemic. 

According to J.P. Morgan, vacancy rate trends have varied widely by property type during the pandemic. Industrial, which climbed above 12% in 2010, has recently maintained a very low level below 4%. Office and retail vacancies spiked through the pandemic, though retail finally saw a small improvement in the second quarter of 2021. Apartment vacancies jumped at the start of the crisis but have since dropped sharply back to pre-pandemic levels.