August 2024 Commercial Real Estate Market Overview

[Sanjeev Advani]

As we progress through 2024, commercial real estate shows a mixed landscape influenced by economic factors like inflation and labor market shifts.

Office Properties

The office sector remains strained, with vacancy rates at a record high of 13.8% in July. Although leasing activity is down 63% from pre-pandemic levels, the pace of new vacancies is slowing, reducing unoccupied space from 58 million to 44 million square feet over the past year.

Multifamily Properties

High mortgage rates have boosted demand for rental units, with net absorption up 90% year-over-year. Despite strong demand, new construction has kept vacancy rates near 8%, with rent growth steady but modest.

Retail Properties

Retail space availability is at a record low, with only 4.7% available for lease. Despite a 40% drop in net absorption, the vacancy rate remains stable at around 4%, indicating continued tight conditions due to limited new construction.

Industrial Properties

The industrial sector is cooling, with net absorption down 70% from last year and rent growth slowing to 3.6%. Vacancy rates have risen to 6.5% as inventory outpaces demand, though easing inflation could revive demand.

Hotel Properties

Hotel occupancy has stabilized at 63%, still 3% below pre-pandemic levels. While full recovery remains elusive, the sector's current stability is a positive sign amid ongoing challenges.

Conclusion

The second half of 2024 presents a varied landscape for commercial real estate, with opportunities and challenges differing across sectors. Investors must stay agile to navigate these shifting dynamics.