A recent Marcus & Millichap mid-year report showed that students returning to school could boost the commercial real estate industry, GlobeSt.com reports. The firm expects that there will be more job creation in the retail, hospitality and education sectors as the two million workers who stayed home to take of their children during the COVID-19 pandemic can return to work when school is back in session. Students coming back to college towns and large metro submarkets with higher education facilities is also expected to boost CRE.
A return to school is especially good news for retail CRE as parents are expected to spend all-time highs on clothing and technology items, according to Marcus & Millichap.
“In anticipation, brick-and-mortar stores and online vendors will bolster inventories this summer, driving import volumes and demand for warehouse space,” the firm said in its report. “By expanding inventories some of these industrial tenants’ will exceed their current storage capabilities, driving demand for available warehouse and distribution space prior to the holiday months.”
Surveys have shown that shoppers plan to spend more per child on back-to-school shopping and are also looking forward to making their purchases in physical locations. If the forecast is accurate, apparel and department stores should see a financial uptick, according to the report’s authors.
College town CRE also expected to see a boost
The COVID-19 pandemic had a negative impact on apartments near colleges, as well as restaurants, hotels and bars. Students returning for in-class learning should help all of these entities bounce back, according to the Marcus & Millichap report. The study showed that college town apartments suffered their highest subsector vacancy basis points total (110) in almost seven years. As campuses reopened during the second quarter of this year however, rental availability dropped 160 basis points to 3.7%. That was the lowest rate since 2013. Meanwhile, effective rent reached an average monthly rate of $1,642, an all-time high.
“Since (subsector vacancy reached an all-time high), most four-year universities have announced plans to resume in-person learning this fall, the report said. “These declarations have motivated some students to spend the spring and summer where they attend school, rapidly reversing performance trends for apartments adjacent to campuses.”
Additionally, hospitality CRE venues should also see a back-to-school bump as fans return to sporting events, benefiting neighboring hotels and restaurants.
“College town hotels, namely those within a three-mile radius of venues, are poised to see occupancy levels and room rates return to traditional norms from September through November of this year, lifting hotel revenues,” the report said. “Restaurants and bars will also register sizable spikes in patrons and profits during home-game weekends that could lift local demand for available dining space. For these businesses and the football venues, staff additions are likely necessary to meet the expected increase in guests.”
Back-to-school brings pros and cons to the self-storage sector
Self-storage is one sector that isn’t guaranteed to see a lift from students going back to school, according to the report. With students back in the classroom, less space will be needed for at-home learning. Rooms can be used for other things, decreasing the need for self-storage. The self-storage sector could rebound when offices reopen as people will need to move for work again and have a use for a storage unit.
“Additionally, an overall decline in unemployment will foster new household formation and consumer spending that eventually drives storage needs,” the Marcus & Millichap report said. “During the shift from short- to long-term demand drivers, property fundamental improvement may lose momentum. Nonetheless, both vacancies and rents are expected to be positive over the next cycle as delivery volume falls below the 60 million-square-foot mark for the first time in three years.”
Joe Dyton can be reached at joed@fifthgenmedia.com.
