Crexi National Commercial Real Estate Report: September 2024

Retail

For Sale

Cap Rates: Retail asking cap rates have effectively plateaued since March 2024, while cap rates from sold retail assets have snuck slightly higher over the last few months. Sold cap rates reached a median of 6.69%, which is up 7.32% year-over-year and indicates some lessening of stability in what was the golden-ticket asset type emerging from the pandemic.  

Absorption: While asking prices rose for retail and continued hovering around their highest-ever on Crexi at $292.75 per SF in September, indicating heightened seller confidence in value, sold prices per square foot saw a sharp decline of 5.84% compared to August. This downward momentum continued for a fourth consecutive month from its summer peak of $414.90 per SF in May 2024.

For Lease

Asking vs. Effective Rates: In the current competitive market, we observed effective lease rates getting closer to what landlords are asking for, with effective rents closing at $17.32 annually per SF compared to landlords' median of $18.56.

Broader Trends

Despite early resilience post-pandemic, the retail sector is now facing more volatility, particularly as inflationary pressures and changing consumer habits hit the market. Declining sale prices could indicate growing caution among investors, though this may change in the aftermath of the Fed’s rate cuts. Nonetheless, higher absorption rates suggest that retail spaces are still attracting tenants, possibly driven by shifts in consumer behavior toward localized shopping hubs.

Office

For Sale

Pricing: Following its sharper growth in August 2024, the median asking price per SF for office properties slowed its climb in September, reaching $245.07.

Cap Rates: Office asking cap rates continued their downward trajectory after reaching a peak in July, hitting 7.25% in September. However, effective cap rates shot up last month, up 28 basis points to a median of 7.54% nationwide.

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 space rates remained steady, holding tight at around $20/SF annually for the third consecutive month. While effective lease rates were below asking rents, they’ve been trending slightly up in Q3, hitting 17.47 per SF annually in September.

Broader Trends

Hybrid work models and reduced demand for large office spaces are significant factors shaping the office sector’s future. The slow recovery in office space absorption rates, as well as fluctuating prices, reflect the market’s continued adaptation to changing tenant preferences and the structural shifts in how companies use office spaces.

Industrial

For Sale

Pricing: After experiencing moderate pricing growth in August, industrial assets on Crexi showed little change headed in September. In the same period, we observed a surge of new inventory, with over 20% more industrial listings hitting the market last month.

Cap Rates: Asking cap rates continue to climb, hitting 7.72% and continuing the growth trajectory they’ve experienced since January 2024. Sold cap rates for properties traded in September were slightly lower at a median of 7.2%, but have risen by 15 basis points year over year. 

Absorption: The absorption rate for industrial properties in September 2024 was roughly 2.35%, down from August’s 2.44%. In the same period, the median closed price for industrial assets lowered by 6%, with a median sold price of $121.01/SF.

For Lease

Asking vs. Effective Rates: Industrial asking rates have remained relatively stagnant in the last several months, dropping by less than 1% to reach the $12.68 median asking rate per SF annually in September. Effective lease rates, however, continue to fall, lowering to $10.31 per SF annually and a median 4% below asking.

Broader Trends

Industrial real estate has been resilient post-pandemic due to e-commerce demand, but a growing supply coming online  may now be dampening that growth. The increased supply aligns with broader industrial trends showing that while the sector remains strong, it’s likely entering a slight period of correction and then stabilization after several years of rapid growth.

Multifamily

For Sale

Cap Rates: Multifamily sold cap rates experienced a sharp rise in September, rising 14 basis points to a peak of 6.1% median for listings on Crexi. Previously, rates had fluctuated around 6%, besides hitting its previous peak of 6.08% in July of 2023.

Absorption: While absorption was highest for multifamily in September compared to other asset classes, the sector’s overall absorption dropped from 3.2% to 2.8%, with sold pricing hitting a median of $276.13/SF in September.

Broader Trends

The multifamily sector has been a standout performer in recent years, driven by high demand for housing and limited supply in many urban markets. However, rising interest rates and affordability challenges are now beginning to slow the pace of demand and investment. The increase in cap rates suggests that investors are requiring higher returns to offset the risks associated with the sector, while the drop in absorption hints at softening renter demand, possibly due to affordability constraints and competition from single-family home buying as interest rates stabilize.

Regional Breakdown

• Houston, Chicago, and Dallas were the top three markets attracting the most buyer interest, whereas Miami displaced Dallas as the third-most-popular metro for actively searching tenants.
• Overall, many buyers ramped up their sleepier summer with an end-of-season push, with general search activity rising in many top metros ahead of an anticipated busy fall rush.
• Houston, Chicago, and Miami were also the most-searched markets for space for lease. Miami, in particular, attracted the most notable gains in buyer and tenant attention - up 10.8% and 6.5%, respectively.

Regional Breakdown

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.

Get more data-driven insights with Crexi Intelligence.