Crexi National Commercial Real Estate Report: October 2024

Retail

For Sale

Pricing: Following a period of slight growth, retail asking prices tapered off slightly to hit $276.37 per square foot, while still performing 6.6% above pricing in October 2023. 

Cap Rates: Retail asking cap rates have effectively plateaued at 6.51% since March 2024, while cap rates from sold retail assets experienced a sudden contraction in October, dropping six basis points. While sold cap rates are still up 5.34% year-over-year, the drop indicates a lessening of retail-related risk assessment, especially headed into the holiday months and in the face of tapering inflation.

Absorption: Sold prices per square foot for retail experienced a continuing decline in October, but milder than the sharp drop that occurred in September. Retail absorption also climbed three basis points to reach 1.25% on Crexi in the same period.

For Lease

Asking vs. Effective Rates: Both asking and effective rents inched up in October as demand for retail by tenants experienced gains. We observed effective lease rates jump above what landlords were asking for and tenants beating out competitor demand, with effective rents closing at $19.40 annually per SF, compared to landlords' median of $18.37.

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.

Office

For Sale

Pricing: After six months of consistent asking price growth, office property asking prices faltered, dropping slightly to a median of $247.04 per square foot in October. In the same period, however, occupancy showed a pronounced monthly jump up to 79.2% and an annual lift from 72.4% in October 2023, indicating a gradual sector recovery.

Absorption: Absorption for office properties dropped from 2.7% in August to 2.46% in September, though time on the market for listings shortened, with the median time close to 200 days (202 days in September). Office listings closed at a median of $210/SF, up 2.5% year-over-year.

For Lease

Asking vs. Effective Rates: Office asking lease rates have been relatively stable in recent months, maintaining an average of around $19-20 per square foot annually on Crexi. However, effective lease rates rose in October to $19.77 – indicating higher demand for the more desirable Class A office listings sold through Crexi’s platform.

Broader Trends

The U.S. office real estate sector has shown signs of stabilization. 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: Industrial asking prices remained steady throughout October, dipping less than $0.40 per square foot from the previous month. The median asking price held around $110.64 per square foot, demonstrating a bottoming out following ten months of pricing decline and a 10.49% drop year-over-year.

Cap Rates: Correspondingly, asking cap rates continue to climb but are petering, up three basis points to hit 7.34% median in October. However, sold cap rates for properties traded in October continued to contract to 7.23%, indicating a lowering risk profile among the industrial assets trading hands. 

Absorption: The absorption rate for industrial properties in October 2024 dropped slightly, now at 1.48%, down from previous months, suggesting a slight cooldown in demand. In the same period, the median closed price for industrial assets inched closer to meeting sellers' pricing expectations, hitting $105.87 per square foot.

For Lease

Asking vs. Effective Rates: Industrial asking lease rates have stabilized at around $15.00 per square foot per year, with effective rates trailing slightly lower at around $12.00 per square foot, indicating some tenant negotiation power in the market.

Broader Trends

The industrial real estate sector has experienced notable shifts in recent months. While rents have increased year-over-year, they’ve reached a slight stagnation in the market and growing vacancy. This slowdown is attributed to less leasing activity and a significant delivery in new warehouse construction. Despite these challenges, the sector remains resilient, with long-term demand drivers such as e-commerce growth and supply chain optimization continuing to support the market. 

Multifamily

For Sale

Pricing: Multifamily properties continue to see strong asking prices and experienced a noticeable jump in October 2024, with the average square foot price reaching $170.30, reflecting ongoing demand in this asset class.

Absorption: While absorption was highest for multifamily in October compared to other asset classes, the sector’s overall absorption dropped 1.48%, while sold pricing hit a median of $218.55/SF in October, the highest of the main asset classes.

Broader Trends

Multifamily remains a robust sector, but rising cap rates suggest investors are more risk-conscious due to fluctuating economic factors. High property values and interest rates may limit growth as affordability concerns weigh on the market.

As of the third quarter of 2024, national rent growth improved to 2% year-over-year, the highest since the first quarter of 2023. However, this rate remains below the pre-pandemic average of just over 4%. Vacancy rates have stabilized at 8.7%, a slight increase of 20 basis points since the end of last year. 

These trends suggest a multifamily market in a stabilization phase, with rent growth showing signs of recovery and steady vacancy rates. However, the outcome of several housing-related ballot initiatives will have a long-term impact on housing supply, future development, and affordability, which will influence the sector’s performance.

Regional Breakdown

• Houston, Chicago, and Dallas were the top three markets attracting the most buyer interest, whereas Charlotte displaced Dallas as the third-most-popular metro for actively searching tenants.
• Overall, buyer activity was dependent on markets, where Midwest metros like Chicago and Detroit saw gains in search activity and Sunbelt markets like Houston and Miami saw declines month-over-month.

Median Cap Rates & Changes by Top MSAs – October 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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