Crexi National Commercial Real Estate Report: November 2024

Retail

For Sale

Pricing:  In November, retail asking prices per square foot hit an average of $273.28, continuing a two-month trend of slight declines in valuations. 

Cap Rates: Asking cap rates for retail properties have remained sticky at 6.5% since July 2024, reflecting relatively stable perceived risk in this asset class. 

Absorption: Despite the slight decline from its previous plateau, retail still commands investor demand as the most expensive property type on Crexi. Sales price per square foot also rose last month to $196.35, reflecting a 1.62% increase from prices in November 2023.

For Lease

Asking vs. Effective Rates: Down $0.10 per square foot from October, November’s retail asking rates were a solid $18.37 per square foot annually and maintained the stability the sector has shown in recent months with a competitive tenant landscape that’s stabilized but limited in overall growth. Retail effective lease rates have been slightly higher than asking, with November’s rates averaging  $19.29 per square foot.

Broader Trends

As of the third quarter of 2024, the national retail vacancy rate remained steady at 4.1%, consistent over the past three quarters. This stability is attributed to minimal tenant consolidation and move-outs, coupled with years of limited new supply, leading to increasingly tight availability across the retail sector. 

Overall, the retail real estate market continues to show strength, with stable vacancy rates and growing consumer spending. Nevertheless, stakeholders should remain attentive to the challenges posed by rising rents and limited space availability, which could impact future growth and tenant composition. 

Retail real estate fundamentals remain strong, supported by a prolonged lack of new construction. The retail availability rate is projected to decrease to 4.6% by year-end, with asking rent growth experiencing modest but noticeable growth in the last 12 months. Demand is particularly robust for open-air suburban retail centers, aligning with shifting consumer preferences toward convenience and experiential shopping experiences. 

Office

For Sale

Pricing: Office sale prices per square foot remain subdued at approximately $238.14 nationally in November, a slight tapering off from the growth it experienced between March and August 2024 on Crexi. Many of these gains were to do with Class A, high-demand properties hitting the market, and the average sale price of $150.41 per square foot in November shows that lower value properties are now comprising the greater share of completed transactions.

Cap Rates: Office risk continues to stay top-of-mind with investors, as cap rates climbed to their highest on Creci in November, hitting a 7.7% average nationwide.

For Lease

Asking vs. Effective Rates: Despite landlords’ commitment to an average of $20.00 per square foot for the last three months in a row, office effective lease rates fell from $19.27 to $18.90 in November, reflecting limited growth due to ongoing hybrid work trends. The normalization of hybrid working arrangements continues to limit the growth of office tenant demand.

Broader Trends

As of the third quarter of 2024, the national office vacancy rate increased by 55 basis points quarter-over-quarter, reaching 20.9%. However, approximately one-third of U.S. markets experienced flat or declining vacancy rates during this period, indicating regional variations in market dynamics. Leasing activity has maintained strong momentum, growing by 0.4% quarter-over-quarter to 50.4 million square feet, reflecting 86% of pre-pandemic activity levels. 

Overall, while the office sector continues to navigate post-pandemic shifts, including hybrid work models and changing tenant preferences, recent data suggests a trend toward stabilization, with improvements in leasing activity and absorption rates in certain markets.

Industrial

For Sale

Pricing: Following a year in corrections, industrial properties have started to turn a corner, with asking prices increasing for the first time since H1 to hit $110.29 in November. Thanks to limited supply, sustained investor interest is expected, driven by robust demand from e-commerce and logistics sectors. Sold prices per square foot for industrial fell slightly in November to $100.93, but still hover in highest-ever territory for industrial on Crexi.

Cap Rates: Thanks to this turned pricing corner, industrial cap rates dropped slightly in November from an all-time high of 7.40% to 7.33%, though the sector still has a way to go to assuage investor assessment of risk, indicating a relatively low-risk profile compared to other asset types.

For Lease

Asking vs. Effective Rates: Average industrial lease rates climbed in November to reach $13.44 annually per square foot, up from $13.29 in October. While this is below November 2023’s highs of $13.87 per square foot, effective lease rates are climbing closer to reach parity with asking rents, hitting $11.98 per square foot annually. This reflects an increase in industrial tenant demand, though not as robust as previous rapid rent increases in recent years.

Broader Trends

The industrial real estate market has experienced a deceleration in its previously rapid growth. Vacancy rates, which had dipped to 2.8% in mid-2022, have risen due to the influx of new supply. 

Annual rent growth has also moderated, dropping from a peak of 22% in Q3 2022 to 3.6% by mid-2024. Despite this slowdown, the sector remains robust, bolstered by the expansion of e-commerce and significant manufacturing investments, particularly in the Sunbelt region. Notably, nearly half a trillion dollars have been committed to new manufacturing facilities, including a $65 billion semiconductor plant in Phoenix, Arizona.

Multifamily

For Sale

Pricing: Asking prices per square foot experienced a sharp decline for multifamily assets in November, hitting $167.27 and down from the previous month. Despite this decrease, investor confidence in the multifamily sector is strong, with sold pricing per square foot high above asking at an average of $211.72 in November. The U.S. economy absorbed 138,000 units in the third quarter of 2024, the fourth-highest level on record, underscoring robust demand.

Cap Rates: Despite strong investor demand, economic headwinds have kept asking cap rates stable at 7.0% for the last three months. Sold cap rates, however, dropped to an average of 6.22% in November, indicating a growing confidence in the sector despite economic-driven headwinds in the last year. 

Broader Trends

The multifamily sector has experienced a significant influx of new units, with approximately 1.2 million apartments completed over the past two years. This surge in supply has led to increased vacancy rates in certain markets, particularly those that may have been overbuilt. However, a recent uptick in leasing activity indicates a robust demand for these new units, suggesting that the market is beginning to absorb the additional inventory. 

Rental price trends vary across different regions. Some cities have seen declines in rental prices, attributed to the increased housing supply from multifamily completions initiated during the pandemic. Conversely, other areas continue to experience rent growth, reflecting localized demand and supply conditions. 

Looking ahead, the multifamily construction pipeline appears to be slowing, with a notable decline in the construction of new multifamily housing units. This slowdown is expected to tighten supply in the coming years, potentially leading to upward pressure on rents by late 2025 or 2026. Investors are increasingly cautious about initiating new projects, focusing instead on acquiring existing properties at favorable prices.

Regional Breakdown

• Houston, Chicago, and Dallas remained the top three markets attracting the most buyer interest in November, while Houston, Chicago, and New York ranked as the most popular markets for tenants searching on Crexi.
• Overall, buyer activity remained consistent from October to November, despite holiday-related slowdowns. Dallas and Miami saw more noticeable declines in search activity on the buyer side, while Detroit and Orlando saw more buyers searching for investment properties.

Median Cap Rates & Changes by Top MSAs – November 2024

Disclaimer: This article's information is based on Crexi's internal marketplace data and additional external sources. While asking price in many ways reflects market conditions, variations in pricing are affected by changes in inventory, asset size, etc. Nothing contained on this website is intended to be construed as investing advice. Any reference to an investment's past or potential performance should not be construed as a recommendation or guarantee towards a specific outcome.

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