“Overall, we believe 2021 will be a positive year for commercial real estate and the economy as a whole. We are blessed to live and work in the Huntsville/Madison market and know the future is bright for all of us.” Those were the final words of our annual report in 2020, and I am happy to say we got that one right—despite all the obstacles that were put in the way of the U.S. economy.
2021 brought many challenges, but our market kept moving like an unstoppable train. Delta, Omicron, inflation, supply chain issues—it didn’t matter. The train kept on rolling. So, what did that mean for the commercial real estate industry? Let’s look closer.
To put it simply, 2021 was a year for the books. The U.S. consumer, which accounts for 70% of the U.S. GDP, came roaring back to stores and restaurants in record numbers. According to the most recent data from the retail industry organization ICSC, all categories except craft stores, movie theaters, and department stores were above their previous year sales per square foot through the end of the 3rd Quarter in 2021. Some of the standout leaders were home goods (+97.9%), apparel (+27.8%), restaurants (+24.2%), sporting goods (+33.1%), and pet supplies (+22.7%). Not only did they exceed the previous year, but all these categories surpassed their pre-pandemic sales of 2019. Keep in mind that these are brick-and-mortar numbers, not online.
The consumer bounced back to shopping on their feet instead of from the couch. This growth in sales led retailers to open new locations, which meant new development, backfilling of vacant spaces, increases in rents, and lower cap rates on investment sales. These trends should continue through at least the first half of 2022.
Like what we observed in 2020, the other sectors of CRE saw continued growth throughout 2021. Office, warehouse, and multi-family stayed in high demand, which led to record-breaking development here in Huntsville. One simply has to visit the Greenbrier exit on I-565 to see the construction of numerous warehouse and industrial projects. It appears there is another apartment complex breaking ground every week. Projects like 225 Holmes and The Range continue the growth of Class-A office space in the downtown area.
Ground-up, new construction isn’t the only development happening in the Huntsville/Madison market. Redevelopment projects such as Lincoln Mill and The Market at Hays Farm have used existing properties to create new retail and office opportunities.
As we mentioned previously, we see these trends continuing into 2022 and through the first half of the year. That said, we don’t see a year-long bull market as we experienced in 2021. The Fed is going to be forced to increase interest rates with the forecast being at least three rate hikes in 2022 starting with the March meeting. All of this is due to continued inflation growth. These increasing rates will put pressure on CAP rates leading to the slowing of investment sales.
Also, the second half of the year will be focused on the mid-term elections, which historically cause a slowdown in activity as business owners and investors wait to see what happens. Finally, we will see increasing construction costs continue to put pressure on new development and redevelopment projects.
We at Crunkleton Commercial Real Estate know how fortunate we are to be part of the growing Huntsville/Madison market, and we see many bright days ahead. 2022 will be a good year for business in this market and we strive to contribute to the success of everyone in North Alabama. Let us know how we can help you navigate the commercial real estate market in the coming year.
Chattanooga-based company, High Point Climbing and Fitness, is set to bring more world-class climbing to Huntsville with the addition of a new climbing and training facility just north of the city center. This new site will be located within the historic Lincoln Mill development and offer area climbers around 11,000 square feet of bouldering terrain and training space. The new High Point location will also feature hydraulically adjustable training walls and a full pro-shop stocked with all the top brands of climbing equipment. High Point’s new Huntsville facility is slated to open by the end of 2022.
Honest Coffee Roasters – Huntsville is proud to announce that The Avenue Madison will soon be home to its newest location. After five years of serving the community with high-quality coffee beverages, açaí bowls, breakfast, and lunch at its Clinton Avenue site, the Honest team has decided to expand its reach by opening another location in downtown Madison. The new shop will be at 92 Shorter Street in a 1,919 square foot space on the west side of the mixed-use development. Owner and Operator Christy Wimberly expects the new shop to open in late Summer 2022.