The beginnings of a transaction recovery upon the CRE industry, says John Chang, SVP and director of research at Marcus & Millichap in a new video, with all signs pointing to a rebound in volumes in 2021.

Numerous factors coming into alignment have the potential to drive a surge in commercial real estate investment, says Chang. “Transaction velocity has already made strong headway since the second quarter trough. The total number of sales in the fourth quarter of 2020 is estimated to be double the levels we saw in the second quarter.”

Investors are also starting to show more optimism. “At this point, it looks like we have made it through the worst of the economic downturn created by the health crisis,” says Chang. “Now, instead of focusing on downside risk, investors are focusing on upside potential. Fueling that drive is an unprecedented wave of capital.”

At the close of 2020, transaction volume was not surprisingly down compared to 2019, but they were above real estate closings at the close of 2006, which is generally considered the height of the pre-financial crisis.

The $900 billion fiscal stimulus package will help to drive this recovery. The bill includes $284 billion in PPP funding, $600 in direct stimulus checks and additional funding for unemployment benefits. “Although a full recovery will require getting control of the pandemic, the new stimulus will be an important ingredient in sustaining the economy until we get there,” says Chang. The new stimulus will also eliminate investor uncertainty. “That will be a key ingredient in unlocking investor decision making in 2021,” adds Chang.

The combination of increased capital, low interest rates and increased debt financing will “reignite” investment in 2021, according to Chang. However, not all markets will recover simultaneously. Major metros and destination markets will take longer to recover and property types like office, senior housing, hotels and shopping centers will also be slower to reach pre-pandemic norms.

“Once the tide turns and there is more clarity on the outlook for these metros and property types and the flow of capital to these slower reviving segments will escalate,” says Chang. “If these factors align as expected, 2021 could deliver a significant rise in investment activity and the economy will take a significant step toward normalization.”