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The commercial market is starting to rebound. Since the second quarter of 2020, vacancy rates have fallen for apartments and multifamily units, industrial, and retail properties, the National Association of REALTORS® reported at its inaugural C5 Commercial Real Estate Summit in New York City on Monday. The conference is bringing together commercial investors and industry leaders, REALTOR® associations, economic development corporations, government officials, REITs, and more.
For its report, NAR analyzed 390 commercial real estate markets to identify those with the most robust recoveries, including positive net absorption as well as strengthening rents across the multifamily, industrial, and retail sectors. The top 10 commercial office markets as of the third quarter of 2021 (listed in alphabetical order) are:
- Austin, Texas
- Boise, Idaho
- Chattanooga, Tenn.
- Daytona Beach, Fla.
- Miami, Fla.
- Myrtle Beach, S.C.
- Omaha, Neb.
- Palm Beach, Fla.
- Provo, Utah
- San Antonio, Texas
Asking rents are climbing in the apartment and multifamily sector (up 11% compared to a year ago). Industrial and retail properties have increased too, up 7% and 2%, respectively. The office sector is the only one posting a year-over-year decline, down 0.4%, NAR reports. The office sector has seen absorption rates and rents decline.
“Even as the economy makes a steady recovery, the one sector still lagging behind has been the office market,” says Lawrence Yun, NAR’s chief economist. “Work-from-home flexibility looks to be the defining shift in the new post-pandemic economy. … Despite the overall challenges, however, some local markets are bucking the trend with more office occupancy and rising rents. A combination of strong in-migration and relatively lower cost of doing business is driving these growth markets.”
Small- and medium-sized metro areas are reporting increases in office occupancy rates and are outperforming most large cities as well as the national average, NAR reports.