Post-Pandemic Commercial Real Estate Six Years On

Post-pandemic commercial real estate did not return to normal. It repriced. Six years after the 2020 shock, the market has settled into a new equilibrium with different winners and different cap rates. It also left a pile of 2021 and 2022 transaction data that can badly mislead anyone who treats it as current evidence. This is a look at what the reset actually did to values, written from the appraisal side of the table.

The Post-Pandemic Commercial Real Estate Reset

Every major disruption resets which properties the market wants. The pandemic did it faster and harder than most. Demand for space did not disappear; it moved. It left commodity office space and flowed toward logistics, housing, and experience-driven retail.

Values followed the demand, but unevenly and with a lag. That lag is where owners get hurt. A building can carry a pre-reset number in its owner’s head, its loan file, or its tax assessment. It can stay there for years after the market has moved on. Six years in, closing that gap between remembered value and current value is the most common reason commercial clients call us.

Office: Bifurcation, Not Extinction

The office story is not one story. Top-tier buildings with strong amenities and locations have held demand as tenants shrink footprints but upgrade quality. Older commodity buildings have repriced hard, and some have repriced below their debt.

The appraisal implication is strict comp discipline. A Class A tower and an aging Class B building three blocks apart are no longer close substitutes. Blending their sales produces a number that describes neither. This is the same market-analysis rigor from our article on commercial appraisals in a shifting market. Here it applies to the sharpest divide the reset created.

Conversions Are a Highest and Best Use Question

The headline response to empty offices has been conversion: to residential, to healthcare, to storage, occasionally to something stranger. From a valuation standpoint, a conversion is not a construction question first. It is a highest and best use question, one of the core analyses in an MAI-level appraisal.

Highest and best use asks what use of the property is legally permissible, physically possible, financially feasible, and maximally productive. When the answer changes from “office” to “apartments,” the entire valuation framework changes with it. Different buyers, different income analysis, different comparables. Owners weighing a conversion, and lenders financing one, need the value analyzed under both uses before committing. Guessing at feasibility is how conversion projects end up in workout.

Industrial and Multifamily Held the Line

Not every sector needed reinventing. Industrial demand, driven by e-commerce and supply chain reshoring, stayed strong through the whole cycle. Multifamily demand held as housing shortages persisted. Still, higher rates and construction costs squeezed development and put pressure on values bought at peak pricing.

Held value does not mean static value. Both sectors repriced as interest rates rose, because cap rates follow financing costs even when tenant demand is healthy. An industrial building can be full, performing, and still worth less than its 2021 number. The rent roll and the value are related, but they are not the same fact.

Handle 2021 and 2022 Comps With Gloves

Here is the technical problem the reset left behind. The 2021 and 2022 transaction wave closed at historically low rates, in a frenzy that no longer exists. Those sales are real data, but they describe a financing environment that vanished. Use them as direct comparables today and the value comes in wrong, usually high.

A competent appraisal treats that era the way it treats any anomaly. Verify the deal terms, adjust for market conditions between the sale date and the effective date, and lean on current income evidence where the sales record is distorted. This is the date-of-value discipline our guide to real estate market cycles walks through. Value has a date on it, and 2021 is not that date.

What Owners Should Do With the New Numbers

The reset cuts both ways, and both directions reward a current appraisal. If your property’s market value has fallen below its assessed value, you may have grounds for a property tax appeal. The appraisal is the evidence that carries it. If a loan maturity or refinance is coming, get the value before the bank does. Lenders follow the Interagency Appraisal and Evaluation Guidelines on when collateral needs a fresh look, and a stale number rarely survives that review. And if you are weighing a sale or a conversion, start with what the property is worth under today’s conditions, not the ones you bought in.

Our commercial appraisal team works these assignments across all five PahRoo markets. That runs from single-tenant industrial to conversion feasibility on obsolete office stock.

Price the Market You Are In, Not the One You Remember

Six years on, the post-pandemic commercial market is no longer in transition. It is the market. The owners doing well in it share one habit: they retired their pre-reset numbers and re-anchored on current evidence. Get the property valued as it stands today, then make the hold, sell, appeal, or convert decision from that number. The market stopped waiting in 2020. The paperwork should catch up.

Appraisers Who Priced the Boom and the Reset

PahRoo Appraisal & Consultancy provides commercial and residential appraisals across Chicago, Dallas, Philadelphia, Phoenix, and Naples. Led by Michael Hobbs, our MAI and SRA designated team has valued property through the boom, the reset, and what followed.