Tenants Are Going After Space Aggressively As Asking Rates Drop
At the same time inventory jumped significantly, notching an increase of more than 57%.
Overall asking prices for new CRE assets dropped by 4.71% month-over-month in July, the biggest decline since February.
Occupancy rates across all asset classes rose more than 2% during that same period, continuing a pattern that began late last year, according to Crexi’s National Commercial Real Estate Report for July. And those two factors add up to positive signs for the market: “While investors may be lowering or withholding asking prices in response to current market conditions and rising COVID-19 cases last month, tenants continue to capture space at a healthy clip,” Crexi analysts note.
At the same time inventory jumped significantly, notching an increase of more than 57%. Notably, that new inventory consisted of smaller overall available square footages and reflected an average property size decline of 13.1% over June numbers.
Industrial assets added to Crexi in July saw their asking prices fall by 3.13%, while the average square footage of new industrial assets rose by 13%. Unpriced industrial assets on Crexi rose to 22.34% of total inventory in July. And on the flip side, office asking prices dropped the most of any asset class on Crexi, clocking a decrease of more than 4% month-over-month.
But “despite these pricing changes, which were perhaps influenced by the looming Delta variant’s effect on office absorption, occupancy levels for offices increased just shy of 3%, continuing their upward climb from Q4 2020,” the report notes. “In the same period, office leasing rates remained steady, indicating landlord confidence in the sector’s ongoing recovery.”
Medical offices showed a 46.9% increase in available inventory in July, with an increase of 27.6% in medical-related searches.
And after months of tepid interest, New York and Los Angeles were at the forefront again, with each racking up more than 32% of buyer interest.
“Populations seem to be slowly returning to larger cities and denser urban areas as work-from-home wanes for many and businesses adapt their office needs,” the report notes.