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Commercial real estate sales plunged across Northwest Indiana last year

Commercial real estate sales plunged across Northwest Indiana last year

Despite a strong start to the year, retail, industrial and office real estate sales plunged in Northwest Indiana in 2020 as a result of the coronavirus pandemic.

Latitude Commercial's annual market report found retail real estate sales plunged by 40% year over year last year, while industrial real estate sales amounted to only about a fourth of the previous year.

"The impact COVID-19 had on the commercial real estate market and the economy will make 2020 one of the most unforgettable chapters of our lifetimes," Latitude Commercial Co-Founder and President Aaron McDermott wrote. "Global markets plunged as cases of the virus spread throughout the world. As companies closed their doors this led to significant sales decreases across most restaurant sectors. While we did see a slight drop in vacancy rates, the average price per square foot fell for the first time since 2016. This could be because many landlords were more willing to work with their existing tenants by deferring rent or modifying the lease term. There was a huge decrease in demand during 2020 for sit-down restaurants, hotels, and office space."

The retail market started 2020 strong, with properties' months on the market hitting a five-year low of 11 months in the first quarter.

But after the coronavirus hit, retail property sales volume in Northwest Indiana ended up falling from $196 million in 2019 to $117 million in 2020. The average selling price stayed the same at $1.7 million, but the average rental prices plunged from $200 per square foot in 2019 to $148 per square foot in 2020.

The market seemed to start to rebound in the fourth quarter, with sales rising to $56.8 million as compared to $52.5 million in the fourth quarter in 2019.

After a five-year low in time on market in the first quarter, industrial sales plunged from $214 million in 2019 to $52.2 million last year, with the price per square foot falling from $62 in 2019 to $35 last year.

"These numbers should not be viewed as any sort of warning sign as there was a significant decrease in available properties for sale during 2020 as compared to 2019," McDermott wrote. "In fact, the 2020 fourth quarter available square foot for industrial property is at the lowest level since they started recording these figures in 2005."

Despite a significant increase in price per square foot, the office market also saw a decline in volume, with the sales volume of commercial office buildings hitting a five-year low. But the market picked up in the fourth quarter, going from $22.4 million in 2019 to $25.3 million in 2020. The median amount of time on the market remains at about 14 months, the same as a year ago.

The long-term effects of the pandemic on commercial real estate in Northwest Indiana remain to be seen.

"COVID-19 has forever changed the way we do business. Will the closure of offices in downtown Chicago push satellite office space to Northwest Indiana or will they continue to use the Zoom from home model? Will the growth of the home market help rebound a much-needed retail environment, or will the Amazon effect continue to push small retailers out of business?" McDermott said. "Does the stock market volatility continue to push investors into Commercial Real Estate investments or does that CRE markets low cap rate environment start to worry investors? These are all complicated questions and only time will tell."

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.

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