Welcome to the next installment of our Crexi Trends monthly report. In our September 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 September, focusing on average prices 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.
Monthly lease asking rates increased by 3.5% across asset classes
We observed a 3.5% increase in asking lease rates per square foot across every asset class from August to September. Interestingly, this increase was buoyed by recoveries in the office and retail sector, with restaurants, in particular, showing promising recovery.
Average asking rents for new office assets experienced 4.11% growth in September month-over-month, doubling August’s gains from the previous month and continuing to lift the sector out of its uncertainty.
September retail assets experienced a 4.2% increase in average asking rents compared to August’s more modest gains. A higher asking rent indicates demand’s renewed interest in the sector, as investors see the light at the end of the tunnel of COVID-related closures and hardships. This optimism was especially apparent in the restaurant sector, with average asking rents jumping up by 5.83% in September. Too, a growing preference for hands-off, credit-worthy triple net lease tenants makes the sector an increasingly attractive choice for investors seeking passive income streams from reliable tenants.
Asking price per square foot up more 7%, thanks to industrial and retail
We saw a large increase in asking price per square foot across all for sale commercial properties on our platform. The average asking price for newly added listings in September jumped up by 7.15%, whereas for sale listings added in August saw an average price per square foot increase of only 1.31%.
These gains were mainly due to industrial and retail assets. Industrial, far and away the top-performing asset class both before and during COVID, saw a month-over-month average price increase of 17.86% in September. In parallel, cap rates compressed to 6.36% in September, breaking the 7% threshold for the first time since February 2020.
Retail also experienced a jump in average asking price per square foot in September, increasing 7.95% from the previous month. These metrics, coupled with the asset class’ increased asking rates per month, indicate a returning interest in the sector as investors look to take advantage of the discounted deals before economic recovery.
Multifamily shows signs of plateau after quick COVID recovery
Coming off a two-month growth streak, multifamily is showing signs of a plateau following its relatively fast bounce-back from the early effects of COVID-19. The sector’s average asking price per square foot dropped 0.64% in September, after stout 6%+ increases in July and August. In response, multifamily cap rates on Crexi rose by a single basis point, ending the asset classes’ four-month streak of cap rate compression.
This leveling off has yet to point to a conclusive pattern, but suggests that investors are broadening their consideration of other asset classes rather than exclusively favoring multifamily. After returning to pre-pandemic valuations, it remains to be seen how much room to run there still is for multifamily as an asset class, though other classes are still in the process of gaining back lost ground.
Too, this plateau may point to a growing concern of multifamily tenants’ ability to pay rent alongside the expiration of many government-mandated moratoriums. While the National Multifamily Housing Council (NMHC) reported that 79.4% of renters had paid rent by October 6th, the organization says their findings indicate renters are facing growing challenges meeting rent obligations.
Land deals change in composition as Crexi reclassifies asset types and subtypes
In mid-September, the Crexi team re-organized and improved the asset type and subtype classifications available to brokers, so as to better match investors’ search preferences. One key result of this is that the land asset type was restructured to include cross-listed redevelopment sites in retail and other main property categories. This change has already improved the searchability of all listings, but has specifically resulted in a surge in vacant retail structures being cross-listed as land deals, pushing the average price per square foot up. As such, we attribute the 38% increase in pricing primarily to the surge of more expensive deals added to the category.
Highest Average Asking Price per SF By State — September 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.