The COVID-19 pandemic has hit many sectors of commercial real estate hard. But the sector is bouncing back. Investors purchased a record amount of commercial real estate in the third quarter, The Wall Street Journal reports.

But office buildings and shopping malls aren’t behind the boom, as they typically are. Instead, some of the biggest drivers in the commercial sector have been apartment buildings, life-science labs, and industrial properties that service e-commerce distribution centers.

Commercial sales have soared to more than $193 billion in the third quarter, up by 19% compared to 2019 numbers. That also marks the largest quarter for commercial property sales on record, Real Capital Analytics reports.

“Coming out of COVID, we’re actually seeing an acceleration of fundamentals across a handful of sectors and that’s really driving investor attention,” Nadeem Meghji, the head of real estate Americas for Blackstone Inc., told The Wall Street Journal. Blackstone has been the largest buyer of U.S. commercial property this year.

Declines during the initial days of the pandemic, particularly of sales of office buildings and shopping centers, have been offset by the first nine months of this year by the large number of sales in other commercial sectors like life science labs, industrial properties, and apartment buildings, according to Real Capital Analytics. Foreign investors are making more purchases, too.

Many of the commercial sales over the past year were single properties and not by large investors snapping up multiple properties, as has typically been the case in years past, Real Capital Analytics says.

An index for Green Street, a real estate data and analytics firm, tracks real estate investment trusts. Its index has jumped nearly 22% from its pandemic low reached during the summer of 2020. The index is also 8% higher than it was prior to the pandemic.

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A shortage of skilled construction workers is a major culprit behind weakened housing supply and housing affordability in the new-home market, according to a new report by the Home Builders Institute.

“The construction worker shortage has reached crisis level. The construction industry needs more than 61,000 new hires each month if we are to keep up with both industry growth and the loss of workers either through retirement or simply leaving the sector for good,” says Ed Brady, HBI president and CEO. “From 2022 through 2024, this total represents a need for an additional 2.2 million new hires for construction. That’s a staggering number.”

Home sales are outpacing home construction. That has resulted in a backlog of new homes to build as well as supply chain bottlenecks, the report notes.

Since the beginning of 2012, about 10 million new homes for ownership and rent have been built. However, more than 12 million new households have been formed since that time, according to the report.

“The U.S. is experiencing a historically low supply of homes for sale, especially at the lower price points that newly formed households tend to need,” Brady says. “For residential construction to expand and housing affordability to increase, more skilled building trade workers must be recruited and trained for the home building sector.”

The report calls for greater attention to construction job opportunities and an increase to workers’ pay while balancing the need to keep homeownership affordable. Half of payroll workers in construction earn more than $50,460 annually. The top 25% earn at least $71,000. The report also called for an increase in trade skills education for veterans and transitioning military.

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More businesses are hoping upscale workspaces will lure workers back to the office, hunting for new spaces or looking to upgrade existing ones with amenities and perks such as custom-built lounges, game rooms with ping-pong tables and foosball, outdoor space that includes dining areas with fire pits, upgraded ventilation and sanitation systems, and apps that allow workers to contact building security or order food instantly.

“It’s all about how do we as landlords create an environment that gives their tenants and their employees no excuses not to show up,” Jeff Eckert, the head of JLL’s U.S. office landlord representation business, told The Wall Street Journal.

Amenity-rich headquarters and office spaces are driving a rebound in the sector. Leasings had plummeted early during the pandemic as remote work took root. The office vacancy rate is still at 16.8%, the highest since 2010, according to CBRE.

Now, as companies set up for a return, they are realizing they may need to entice employees to come back to the office.

“The top of the top has just gone crazy,” adds Mary Ann Tighe, chief executive for the New York region of the CBRE Group Inc., a real estate firm.

At 730 Third Ave. in New York, the owners, Nuveen Real Estate, are upgrading the space to woo workers back. The building includes outdoor terraces, a food hall, and a fitness center—and two beehives on a seventh-floor terrace for bees to produce honey for workers to take home for free. A lounge area also offers two full-swing simulators to hit a real golf ball to play virtual golf. They’re also hosting karaoke nights and wine tastings and offering electric scooters.

“It’s about making tenants comfortable,” Brian Wallick, director of New York investments, office and life science for Nuveen, told the Commercial Observer. “Certainly with what’s gone on in the last one to two years, you need to have amenities in your building that excite people who are coming back to the office.”

The law firm Venable LLP recently signed a New York City lease for five floors to upgrade its space to win back its employees. Its new space in New York will include a private balcony with a view of the Empire State Building and a cafeteria with a menu overseen by star chef Charlie Palmer.

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Real estate investors are buying up homes, and first-time buyers increasingly are finding themselves up against them in bidding wars.

Investors are drawn to real estate to flip single-family homes, townhomes, and condos for a profit and to build their portfolio of properties to convert them to rental units.

The share of investors is at the highest level since 2015, according to realtor.com®’s data. They’re most notably targeting the Midwest and Sun Belt, where rental prices are climbing but home prices still remain relatively affordable compared with some other regions of the U.S., realtor.com® says.

“Investors are particularly attracted to affordably priced homes, the very homes that would normally be appealing to first-time buyers,” says George Ratiu, realtor.com®’s manager of economic research. “Investors who generally come with cash have a significant advantage over first-timers who typically rely on a mortgage. In a market with few homes for sale already, this prices out many buyers.”

Realtor.com®’s research team identified where investors are purchasing the highest share of homes by evaluating thousands of deed records in the nation’s 50 largest metro areas. They looked at single-family homes, condos, and townhomes that were purchased by investor entities. Individual investors—mom and pops purchasing a unit to rent—were not included in the analysis. For geographic diversity, the team also limited its list to one metro per state.

The following areas are where investors are purchasing the highest share of homes, according to realtor.com®.

Memphis, Tenn.

• Share of investor buyers in July: 17%
• Median list price in September: $249,000
• Median rent in September: $1,217

Birmingham, Ala.

• Share of investor buyers: 16%
• Median list price: $271,000
• Median rent: $1,115

St. Louis

• Share of investor buyers: 14%
• Median list price: $250,000
• Median rent: $1,150

Charlotte, N.C.

• Share of investor buyers: 13%
• Median list price: $390,000
• Median rent: $1,543

Jacksonville, Fla.

• Share of investor buyers: 13%
• Median list price: $370,000
• Median rent: $1,446

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A record number of home builders are reporting a shortage of workers such as carpenters, painters, and electricians, the National Association of Home Builders reports. The shortages come at a time when demand is increasing for new homes. Builders are struggling to meet demand and faced with both surging prices for materials and shortages of lots.

The share of builders reporting a shortage of labor reached a record high of 76% in October, well above the previous peak of 67% that was set at the end of the 1990s, the NAHB reports. The latest percentage is also much higher than the 45% reached during the housing boom in the mid-2000s when the industry needed to find enough labor to build 2 million homes a year to meet demand, the NAHB reports.

More than 55% of single-family builders reported a shortage for each of 16 trades crucial in building a home. More than 80% of builders reported a shortage of labor for carpenters (rough, finished, and framing crews), the survey shows.

At a time when home improvement demand is surging, remodelers also are reporting extreme labor shortages. More than 55% of remodelers reported a shortage in all the same 16 trades.

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Single-family housing starts dropped in October as supply chain woes over construction materials and labor shortages continued to hamper the building industry. Single-family housing starts fell nearly 4% last month to a seasonally adjusted annual rate of 1.04 million, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau reported Wednesday.

Still, single-family housing starts are faring better in the long run, up 16.7% year-to-date.

“The rising count of homes permitted but that have not yet started construction is a stark reminder to policymakers to fix the supply chain so that builders can access a steady source of lumber and other building materials to keep projects moving forward,” says Chuck Fowke, chairman of the National Association of Home Builders.

Builders blame supply chain effects as the reason 152,000 single-family homes that have been authorized but have not yet started, up 43.4% from a year ago.A record number of home builders are reporting a shortage of workers, including carpenters, painters, electricians, and other trades.

“Single-family permit data has been roughly flat on a seasonally adjusted basis since June due to higher development and construction costs,” says Robert Dietz, the NAHB’s chief economist. “Demand remains solid but housing affordability is likely to decline in 2022 with rising interest rates.”

Overall housing starts, which include both single-family homes and multifamily construction, decreased 0.7% in October to a seasonally adjusted annual rate of 1.52 million units. The multifamily sector, which includes apartment buildings and condos, rose 7.1% in October, reaching an annualized pace of 481,000 units.

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