Welcome to the next installment of our Crexi Trends monthly report. In our August data feature, we dive into the Crexi database to pull out relevant patterns and insights from the previous month with an eye towards the future.
This report covers trends observed in listings added to the Crexi marketplace in August, focusing on average price per square foot and cap rates. With this data in hand, we seek to arm investors, tenants, and brokers alike with actionable information to make the most well-informed commercial real estate decisions possible.
Average Asking Price per Square Foot and Changes Month-over-Month
Pricing uncertainty continues with unpriced listings increasing across asset classes
Brokers and sellers across the commercial real estate spectrum are increasingly opting to list their properties unpriced. Every asset class except land properties saw a higher percentage of new listings go unpriced, with multifamily and industrial assets experiencing August increases of 13.34% and 4.99%, respectively. In an uncertain marketplace, property owners are increasingly choosing to strategically lead market demand further along the sale process before introducing price tags into the equation.
Interestingly, the overall portion of unpriced land assets decreased by 1.86% from July to August. Commercial land for sale traditionally makes up the highest percentage of unpriced properties on Crexi’s platform. This change indicates rising confidence in land assets’ value, particularly assets zoned for multifamily or industrial use.
Monthly rents increased despite struggling restaurant spaces, buoyed by retail and industrial success
We saw monthly average asking rents per square foot increase across the retail, land, and industrial asset classes for lease listings added in August. Leading this increase was industrial, with a monthly asking rent increase of 7.94% over July rates.
While restaurant asking rents decreased sharply — by 16.61% from July to August — this decrease could be desirable to businesses looking to take advantage of discounted retail for lease to expand their footprints or move into a more desirable location.
Offices for lease added in August only saw a 0.31% decrease in average asking rent prices, bringing prices back to January-February levels. This relative consistency in pricing points to the sector’s resiliency in this dynamic environment, with for-sale office listings seeing a 2.92% increase in asking price per square foot from July.
Multifamily continues its hot streak with rising prices and contracting cap rates
Continuing its growth from July, the multifamily asset class on Crexi continued to rise in average price per square foot as cap rates compressed. The average pricing per square foot on multifamily listings added in August rose by 6.09% from the previous month, on the heels of a similar increase in July. Multifamily cap rates dropped to 6.22% in August, down from 6.61% in July and continuing its third consecutive month of compression.
This growth points to positive signs for multifamily’s future trajectory. Following a sharp drop at the start of COVID-19 (March to April), multifamily properties for sale have increased in average asking price per square foot by over 35% since April lows. However, the National Multifamily Housing Council (NMHC) reported that 76.4% of apartment residents paid rent as of September 6th, compared to the 79.3% that paid rent in August.
It’s too early to tell, but renters may experience increased difficulty as the support provided by government programs, such as the CARES Act’s unemployment benefits, starts to dwindle. However, with year over year differences in rent payment rates remaining stable and the federal extension of foreclosure moratoriums by the CDC, many investors are seeing concerns of an approaching foreclosure surge abate.
Retail rebounds slightly with a spike in shopping center pricing
Based on the modest gains across the asset class and among subtypes, it appears that shoppers are slowly returning to their retail spending habits. The gradual relaxation of stay-at-home orders on a national level in June and July allowed non-essential businesses to adjust operations and safely welcome back shoppers. Grocery stores and pharmacies, as essential businesses, continue to attract buyer interest on Crexi with a bulk of new inventory added to the marketplace in August.
Retail assets added on Crexi in August showed a slight rebound price-wise, while still finding their legs in a post-shutdown market. The property type saw an average asking price per square foot increase of 2.52% in August. The average asking price per square foot has also climbed 7.74% into August from retail’s April lows, demonstrating the sector’s ability to adapt to the changing consumer environment. Despite Q1 and early Q2 struggles, retail still demands the highest average price per square footage on the Crexi marketplace, a status which doesn’t look to be changing any time soon.
Industrial sees modest price drop with a surge in warehouse inventory
Over the last two quarters, the industrial asset class has been one of Crexi’s highest-performing assets, though this trend showed signs of reversal in August. Industrial properties’ average asking price per square foot dropped 4.1% in August, with cap rates correspondingly rising slightly to 7.31% from 6.98% in July.
We also observed a sharp increase in warehouse inventory on Crexi’s marketplace. The number of new warehouse properties for sale jumped by 89.7% in August, continuing a trend observed throughout Q2. This increased usage of the warehouse subtype on Crexi is largely in response to the established, rising demand for e-commerce storage facilities, logistics centers, and distribution buildings as more brands and retail businesses move their operations online.
Highest Average Asking Price per SF By State — August 2020
Disclaimer: The information in this article is based on Crexi’s internal marketplace data and additional external sources. While asking price in many ways is a reflection of 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.