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What to expect from commercial real estate in 2021

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Yahoo Finance’s Alexis Christoforous and Sarah Paynter discuss commercial real estate outlook.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to move from residential to commercial real estate now, because most office spaces have stood empty this year. More retailers went bankrupt in 2020 than during the Great Recession. So what is the outlook for commercial real estate in 2021? Joining us now is Yahoo Finance's Sarah Paynter, who is here with a look at that. So Sarah, are things going to start to look up for the commercial real estate industry, do you think, in the new year?

SARAH PAYNTER: Thanks, Alexis. In the new year, probably for the first half of 2021, most types of commercial real estate-- so offices, hotels, stores-- are probably going to continue to struggle. But about halfway through next year, we could start to see some stabilization and recovery. Overall, it's expected to trail the economy's recovery. So once we get the vaccine and start to see overall economic recovery, after that, we will see the commercial real estate market starting to lift up again.

ALEXIS CHRISTOFOROUS: Where do you think within commercial real estate, who's best positioned? I mean, you've got the hotels. So many of them have just been decimated because the tourism industry has just been squashed.

Then you've got the office space, a lot of businesses now saying you know what? We don't need all the office space we used to have because we realize a lot of us can do what we're doing from remote location. So which area within commercial real estate do you think is best positioned for a bounce back in the new year?

SARAH PAYNTER: Well, we have already seen amazing performance from warehouse and other logistic-type facilities. And that's expected to continue next year, because with the shift to e-commerce and supply chain issues, distributors of goods want to store up their inventories and be able to distribute them. So warehouses are poised to do very well in 2021 and have already started to do well.

Hotels are among the worst. They probably won't recover until 2023. But office spaces and some kinds of retail, like grocery and outdoor outlet mall type places, should start to perform well in certain areas of the country.

ALEXIS CHRISTOFOROUS: Sarah, I want to get your thoughts on this news we found out today from Goldman Sachs, that they are thinking about a new Florida base. Does this mean they would move their headquarters out of New York City? Can you clarify any of this for us?

SARAH PAYNTER: Yeah, so according to the report from Bloomberg, it's not definite that they would be leaving New York. But we do know from a statement earlier this year that Goldman's Asset Management arm is trying to reduce costs by $1.3 billion annually, which is very substantial, given that their income is $8 billion a year. So they have looked at Palm Beach County and Fort Lauderdale, according to these reports. They already have expanded into Dallas and Salt Lake City.

So it's not definite that they would even be moving to Florida in the first place. But the reports say that they are looking. And it's not a surprise, because a lot of similar asset management companies, like Elliott Management, Citadel, Blackstone are moving or expanding to Florida and other areas that have a lower cost of living, maybe no income taxes, like Florida and Texas, and maybe just a warmer place to live that people are looking to be in.

So a lot of places are starting to look. And that's why rumors of Goldman Sachs' plans, whether or not they decide to go with Florida or not, has been quite alarming to the New York industry, to see whether the financial real estate market is going to remain there when there's a lot of taxes and other high property values that can be a barrier for some companies.

ALEXIS CHRISTOFOROUS: That would be a tremendous loss in revenue for the city of New York. We'll be watching that one closely. Sarah Paynter, thank you so much.