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  • Writer's pictureRealFacts Editorial Team

Q2 2024 Preliminary Trend Announcement

house graphics over a person typing

As Q2 2024 comes to a close, the commercial real estate (CRE) market finds itself in a delicate balancing act, awaiting potential interest rate cuts. The macroeconomic environment remains relatively stable, with moderate growth benefiting various CRE sectors, but signs of a softening economy are emerging. The period of ‘higher for longer’ interest rates continues to exert pressure, highlighting both stability and vulnerability across sectors. This comprehensive report provides insights for investors navigating this complex landscape.

Multifamily Sector: Gradual Demand Catch-Up

In the multifamily sector, the national vacancy rate held steady at 5.7%, consistent with Q1. Effective rents increased slightly by 0.3% to $1,746, while asking rents also saw a 0.3% rise, reaching $1,838. Despite these marginal gains, effective rents are still 1.1% lower than last year and 0.6% below their pre-pandemic peak.

Graph of apartment performance

The trend of slowly catching up to demand continues, with new supply entering the market and easing some housing shortages. The excessive supply trend, measured by completions minus net absorption over 12 months, has shown signs of tapering off, indicating a stabilization in the sector.

Investor Insight: While the multifamily sector is experiencing some recovery, the sustained high level of concessions indicates ongoing market adjustments. Investors should monitor markets with high new supply and track shifts in effective rent growth, especially in metros showing stronger rental demand such as Chicago and Nashville.

Office Sector: Record-High Vacancy Rates

The office sector set a new vacancy record at 20.1%, surpassing the 20% mark for the first time. Effective rents declined by 0.1%, while asking rents grew by 0.3%, a sign of landlords seeking greater concessions to retain tenants. Net absorption was negative at -13.6 million square feet, the worst performance since Q1 2021.

Graph of office rent and vacancy trend

Investor Insight: The office sector’s high vacancy rates underscore the sector's ongoing challenges. Investors should be cautious and focus on properties with strong tenant retention strategies. The sector's future performance will depend heavily on the broader economy and potential shifts in remote work policies.

Retail Sector: Resilience Amid Evolution

Retail vacancy rates remained stable at 10.4% in Q2, with both asking and effective rents increasing by 0.2%. Consumer spending showed a slight uptick, driven by a shift towards experiential purchases over goods. This shift is supporting the performance of retail spaces, particularly in mixed-use developments.

graph of retail rent

Investor Insight: Retail spaces that adapt to changing consumer preferences, combining e-commerce with in-person experiences, are poised to perform well. Investors should focus on mixed-use properties and those in markets with stable or declining vacancy rates.

Industrial Sector: Cooling Down After Rapid Growth

The industrial sector, after a period of rapid expansion, is now experiencing a slowdown. Vacancy rates increased to 6.5%, while both asking and effective rents grew modestly by 0.3%. The sector’s adjustment follows significant inventory expansion aimed at addressing supply chain constraints.

Graph of industrial rent

Investor Insight: Despite the cooling trend, industrial properties remain attractive, particularly those with strategic locations near major distribution hubs. Investors should look for opportunities in markets with slower new construction and steady demand.

Metro-Level Nuances and Key Trends

At the metro level, multifamily markets showed varied performance. Texas cities like Houston, Austin, and Dallas led in new inventory, while Chicago and Nashville saw declines in vacancy rates. However, metros like Austin, Minneapolis, and Jacksonville experienced significant declines in effective revenue, highlighting the importance of local market conditions.

In the office sector, vacancy rate increases were widespread, particularly in tech-focused metros and mid-sized cities. Albuquerque, Lexington, and Wichita stood out with notable declines in office vacancies.

Retail vacancies remained stable or declined in many primary metros, with Cleveland and New Haven showing strong performance. In contrast, Albuquerque and Louisville saw sharp increases in retail vacancy rates.

The industrial sector saw negative absorption in several primary metros, with Los Angeles leading the decline. New completions were highest in San Bernardino/Riverside, Phoenix, and Dallas, reflecting continued high construction levels.


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