Housing starts rose in February, led by a robust increase in multifamily construction, the Department of Housing and Urban Development and the Census Bureau reported Thursday. Housing starts, including both multifamily and single-family, increased 6.8% last month and are up 22.3% over a year ago.

Broken out, activity in the multifamily sector, which includes apartment buildings and condos, rose by 9.3% to an annualized pace of 554,000 units. That marks the best pace since January 2020. Economists expect the multifamily sector to continue to show strength over the coming months.

Meanwhile, the seasonally adjusted annual rate for single-family starts increased by 5.7% to 1.22 million. Supply chain delays and cost issues, however, are limiting the pace of home building in many markets.

“Builders continue to start homes as the demand for new construction remains solid in a market lacking inventory of previously owned homes,” says Jerry Konter, chairman of the National Association of Home Builders. “However, construction costs are rising too quickly, which threatens housing affordability conditions in 2022 as interest rates rise.” Read more: Builder Confidence Dips on Rising Material Costs

In February, on a regional basis, combined single-family and multifamily housing starts were strongest in the Northeast, posting a 28.7% increase month over month, followed by a 15.3% increase in the Midwest and an 11.4% increase in the South. The West was the only region to register a decrease last month, with housing starts falling by 11.4%.

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A boom in life science buildings led Cambridge, Mass., to top a list of most expensive office submarkets of 2021, according to a new analysis by PropertyShark, a real estate data resource. The average price per square foot of office space in Cambridge was $1,560 last year, the highest in the nation—even overtaking West Coast and New York City locations.

For comparison, the average price nationwide per square foot of office space was $237 in 2021.

Life science office spaces have posted significant growth over the last two years. The sector is “benefiting from increased digitalization and investor appetite,” PropertyShark reports in its analysis. “This means successful life sciences startups are driving demand for a growing number of specialized office properties.”

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Demand for industrial space continues to swell and construction is increasing, reaching record-breaking levels, CommercialEdge details in its monthly National Industrial Report.

The average sale price for industrial space was $125 per square foot in February. Ongoing investor demand continues to drive transaction activity to new heights, the report shows.

Industrial space in Seattle is fetching the highest sales prices nationwide, at $357 per square foot. The Bay Area follows at $311 per square foot and Los Angeles at $258.

National sales volume surpassed $9 billion in the first two months of this year. “This strong start is a clear indication that investor interest in industrial properties is anything but abating, given that the first quarter of a year is typically the slowest for commercial real estate transactions,” the report notes.

Nationwide rents for industrial space averaged $6.45 per square foot in February, a 4.4% jump over last year, CommercialEdge’s report shows.

Southern California markets are leading the nation in rent expansion, mostly due to intense activity in Los Angeles and Long Beach, Calif., the report shows. Orange County, Calif., had the highest change with a 7% increase and reaching $11.65 per square foot. Los Angeles followed with a 6.7% increase and then the Inland Empire at 6.5%.

As the industrial sector continues to boom, more construction is underway across the country. A total of 593 million square feet of industrial space under construction nationwide as of February.

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Consumers are resuming pre-pandemic activities, such as working at the office, dining out, and attending sports events, which is boosting all commercial sectors.

Despite the financial pressures of rising interest rates and high inflation, consumers are returning to their pre-pandemic lifestyles, providing a boost to commercial real estate across all sectors, experts said Wednesday at the National Association of REALTORS®’ quarterly Real Estate Forecast Summit.

Mortgage rates for commercial loans have already risen 150 basis points so far this year, but further increases in 2022 are likely to be less sharp, said NAR Chief Economist Lawrence Yun. A slowdown in rate hikes could provide stability as the commercial market continues to recover from taking a deep hit during the pandemic. Yun pointed to the difference between the federal funds rate, which the Federal Reserve raised to 0.5% earlier this month, and the average interest rate on commercial mortgages, which is around 5%. “The market is anticipating multiple rounds of increases,” he said. “Any further rises in the federal rate are already factored in.”

Yun also predicts that inflation will remain high due to elevated oil prices. However, there are positive signs in the recovering job market, which is approaching pre-pandemic levels. In fact, it’s performing better than that in the Mountain and South regions of the country. “The job market is very important for commercial,” Yun said, “especially for retail and office.”

Positive Signs in all Four Sectors

Demand for rental housing is being buoyed by a net increase in household formation, indicating more younger adults are moving out of their parents’ basements. Occupancy rates have increased over the last year for multifamily, industrial, retail, and office properties, and investors stepped up acquisitions in all four sectors in the fourth quarter of 2021.

Yun expressed continued uncertainty about the office sector: A significant number of employees are still working remotely or utilizing a hybrid office model. But while gateway cities like New York, San Francisco, and Boston have been experiencing negative net absorption since the second quarter of 2020, smaller metros like Austin, Texas; Palm Beach, Fla.; and Durham, N.C., have seen positive absorption in the same time period. “The office sector is somewhat wobbly,” Yun said. “But if you look closely, you will see divergence in some areas. It’s not the same everywhere.”

REITs Show Strong Investment Potential

Real estate investment trusts have proven to be an excellent hedge against inflation, outperforming the S&P 500 in periods of low, moderate, and high inflation, said Nicole Funari, vice president of research at the National Association of REITs. Funari attributed part of this resilience to the increasingly diverse REIT portfolios. Emerging sectors, such as infrastructure (e.g., cell towers), data centers, and self-storage facilities, accounted for only 6% of the industry market cap in 2000. As of December 2021, these sectors accounted for 41%. “We have remarkable growth in new sectors,” said Funari. “The diversity of properties has led to very strong performance.”

Funari also said areas of REIT investment that struggled during the pandemic are now picking up speed. The lodging, health care, and office markets—which all saw negative returns at the height of COVID-19 restrictions—posted positive returns from December 2021 to March 2022 of 9.9%, 7.6%, and 4.6%, respectively. Funari saw further good signs for REITs, noting that acquisitions are up across all sectors in the fourth quarter of 2021. She pointed to self-storage as a particularly hot sector.

Resurgence in Retail

Brandon Hardin, an NAR research economist, reported that retail is showing excellent signs of growth, posting sizable gains in employment and wages in the first quarter of 2022—and actually exceeding 2019 levels. Increased income opens the potential for more consumer spending, Hardin noted, adding that data early in the year is already demonstrating this growth. Retail sales showed a sharp year-over-year increase in February, led by gas stations at 37%, food and beverage at 33%, and clothing stores at 30%. “Consumers are feeling better about returning to pre-pandemic activities,” Hardin said. “People are going out to dinner, going out to watch sports.”

Hardin also noted an increase in net absorption for retail space—including beleaguered shopping malls—which rose to a total 96 million square feet as of last Sunday. Further, e-commerce sales began to plateau from the fourth quarter of 2020 through the fourth quarter of 2021 due to consumers returning to pre-pandemic activities but also the ingenuity of brick-and-mortar stores, Hardin said. Many businesses have begun to build “safety inventory,” meaning they have extra stock on hand rather than operating with the bare minimum necessary to cover sales. “They’re moving from ‘just in time’ to ‘just in case,’ ” Hardin said. “This puts them in a better position with consumers.”

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At thedifference.realtor you’ll find language and assets, like social media graphics and email signature banners, that you can use every day.

As president, I’ve had the privilege to meet thousands of you either in person or virtually and to experience the good work you do. I can truly say that REALTORS® bring it home for their clients and communities every day. I wish I could shake every member’s hand in thanks. Instead, let me underscore that NAR will continue to spotlight the REALTOR® difference through the national That’s Who We R campaign.

It’s just as important for consumers to hear it from you—why your service, professionalism and commitment to the Code of Ethics matter. Now, we’re making it easy for you to share that message: At thedifference.realtor you’ll find language and assets, like social media graphics and email signature banners, that you can use every day.

With the ad campaign and these new assets, NAR continues to demonstrate that it’s putting you first.

It has been an honor to serve you and to count myself as part of your REALTOR® family.

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Florida has five of the hottest commercial real estate metro markets in the first quarter: Orlando, Miami, Palm Beach Fort Lauderdale, and Fort Myers, according to new research from the National Association of REALTORS®.

NAR’s Commercial Real Estate Market Conditions Index is calculated by factoring in 25 variables that reflect a metro area’s economic conditions, demographics, and employment, such as job growth, wage increases, and population growth, as well as market conditions on vacancy rates, absorption, rent growth, cap rates, and more.

Overall, the South boasts the most booming commercial markets, with 11 of the top markets.

NAR’s index identified the following 16 markets as the hottest in commercial real estate in the first quarter. (Learn more about each of these markets at NAR’s Economists’ Outlook blog.)

• Orlando-Kissimmee-Sanford, Fla.
• Miami-Miami Beach-Kendall, Fla.
• West Palm Beach-Boca Raton-Delray Beach, Fla.
• Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla.
• Fort Myers, Fla.
• Savannah, Ga.
• Austin, Texas
• Boston-Cambridge-Nashua, Mass.
• Riverside-San Bernardino-Ontario (Inland Empire), Calif.
• Atlanta-Sandy Springs-Roswell, Ga.
• Asheville, N.C.
• Las Vegas-Henderson-Paradise, Nev.
• Bend-Redmond, Ore.
• Charleston-North Charleston, S.C.
• Nashville-Davidson-Murfreesboro-Franklin, Tenn.
• Provo-Orem, Utah

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