As 2024 comes to a close, the mood within the CRE market has shifted toward bullishness boosted by positive macroeconomic developments, accommodating financial policy changes and indications that a new growth cycle is beginning, according to Crexi’s Q3 National Commercial Real Estate Report.
“Our industry is amazingly resilient and sentiment has increased in the last quarter, despite some lingering headwinds,” said Crexi chief operating officer Eli Randel. “Sentiment keeps this market active as much as the crunched numbers, and we’re looking forward to an even more robust 2025.”
The Fed’s interest rate cuts are likely to have a major impact on the industry — specifically lowering borrowing costs and stimulating refinancing activity and new investments. Although there is still some uncertainty about the economy, Crexi said indicators suggest a bottom has been reached and point to early signs of growth in CRE. In addition to healthy buyer activity on its auction platform, bid-ask spreads have narrowed from the second quarter, average marketing periods are decreasing and opportunistic capital raising is starting to turn a corner, the firm said.
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During the quarter, overall buy actions increased across all asset types, with industrial up 5.5%, office up 5.93%, retail up 4.87% and multifamily up 4.97% quarterly. Offers for properties also increased, indicating serious buyers are acting decisively. On the leasing side, total tenant activity was down marginally across most sectors, with industrial tenant activity down the most.
Some highlights from Crexi’s report:
- Median annual asking rent per square foot for industrial remained stable at $13.20 from Q2 to Q3 2024, while the median annual effective rent per square foot increased from $9.50 to $12 quarter-over-quarter. This indicates a potential reduction in leasing incentives or concessions, reflecting landlord confidence in the sector.
- Office tenant activity indicators dropped by 2.63% quarter-over-quarter but increased by 1.59% year-over-year. The annual improvement may suggest that some companies are beginning to re-evaluate their space needs positively, balancing remote work with in-office requirements as the value of in-person collaboration becomes more apparent.
- The median annual asking price per square foot for retail assets decreased marginally from $282.60 in Q2 2024 to $287.37 in Q3 2024. This is likely due to minor market corrections or adjustments as retail demand remains robust.
- Multifamily median annual asking prices per square foot remained relatively unchanged at around $170 quarter-over-quarter, while the median closed price per square foot increased from $208.17 to $212.71. This suggests that strong buyer demand is pushing up sale prices even as sellers maintain their pricing.
“Overall fundamentals remain relatively solid with supply for most product-types held mostly in check,” said Randel. “However, many markets and product types might be slow to recover – if they recover at all. A wave of distressed transactions could show up early in the cycle as more favorable pricing presents an opportunity to cleanse balance sheets and dispose of more challenged assets.”
Approximately $2 trillion in CRE loans are set to mature over the next two years. Office properties represent nearly one-third of maturing debt, followed by multifamily, retail and industrial, Crexi said.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
