Commercial Real Estate Market Report: Q4 2024

Key takeaways

• Multifamily housing: The U.S. multifamily market saw year-over-year rent growth slow to just 0.6% in December 2024, marking the 16th consecutive month with rent increases below 1%. The significant influx of new units suggests that the overall demand for multifamily housing remains strong, though its impact on rents and occupancy levels has been tempered by the impact of higher supply levels. While further rate reductions by the Fed are unknown, positive rent growth in 2025 is a reasonable expectation in most markets.
• Office: Following a period of heavily deflated office demand exacerbated by an influx of new construction deliveries, 2025 may breathe signs of life into the office sector. New in-office mandates by major employers are pushing office demand in a positive direction, but these initiatives will likely not be enough to offset inflated vacancy rates. If steady demand continues while the final wave of low-interest rate construction projects finally tapers off, the resulting decrease in new supply could push office key performance indicators further down the right path.
• Retail: Delivery model evolution is determining winners and losers, and players are proactively changing the way they deliver their products in accordance with shifting preferences. Since consumers are choosing retail venues that offer a better consumer experience, retail models which do not adapt to the rising trend will continue to be challenged while dynamic and innovative retailers will continue to fuel demand for retail real estate.
• Industrial: The industrial segment experienced headwinds throughout 2024, including high interest rates, inflation, labor disputes and election uncertainties, but began to stabilize toward the close of the year. Vacancies continued their two-year-long march upwards in the fourth quarter as speculative deliveries paired with an uncertain political climate placed a drag on net absorption. Despite these challenges, the industrial sector remains healthier than other property types.
• Capital markets: Commercial real estate has not been a favored asset class for some time, with declining valuations over the last two years and depressed transaction volumes. However, we anticipate that in 2025, we will see significant opportunities and upside for those who deploy capital smartly and quickly. The Fed rate cuts and positive job and GDP figures should create more confidence that the market is ripe for deal-making for those with the wherewithal to close transactions.

For a complete analysis of the fourth quarter, download our latest report.

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