Market Trends of United States Real Estate Brokerage Industry
Industrial Sector Leads Real Estate Absorption, Retail Tightens Vacancy Rates
- Although demand growth has increased from 2022, the industrial sector is absorbing unprecedented levels of space, surpassing pre-pandemic figures. In the 12 months leading up to September 2023, net absorption hit a staggering 243 million square feet. This surge has driven the sector's vacancy rate to a mere 5.1%, second only to retail.
- While the pace of rent increases has eased slightly, dropping to 7.5% from a high of 11.4% the year before, they remain unmatched compared to other sectors and have exceeded pre-pandemic levels. Specifically, logistics spaces have seen the most significant uptick, with rents climbing by 8.8% annually. Flex spaces followed with a 4.5% increase, while specialized spaces grew by 6.1%.
- Although retail space absorption dipped by 26% from 2022, the sector's current vacancy rates are at a decade-low, at 4.1%. This marks the retail sector as having the tightest vacancy rate among all commercial real estate segments. Notably, General Retail and Neighborhood Centers led the way, accounting for nearly 87% of net absorption in Q3 2023.
- While retail rents have remained high compared to 2022, their growth has slowed. This deceleration is likely attributed to consumer caution amidst rising costs. Nationally, retail asking rents saw a 3.5% growth, down from the previous year's peak of 4.4% but still higher than pre-pandemic rates. Specifically, neighborhood centers and power centers experienced the most significant rent hikes at 4.4% and 4.2%, respectively. On the other hand, general retail saw a more modest 3% increase but maintained the lowest vacancy rate at 2.5% among all subsectors.
Understand The Key Trends Shaping This Market
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Residential Segment Experiencing Significant Growth
- In March 2024, sales of new single-family homes in the United States bounced back from a revised lower figure in February 2024. This uptick was largely due to a persistent shortage of existing homes in the market. However, this positive trend might face headwinds due to a resurgence in mortgage rates.
- The Commerce Department's report highlighted that the median house price surged to a seven-month high in March, primarily because fewer builders were offering price cuts, leading to a shift in sales toward higher-priced homes. With both prices and mortgage rates on the rise, the housing market could become increasingly unaffordable, particularly for first-time buyers.
- The Commerce Department's Census Bureau reported a significant 8.8% surge in new home sales, reaching a seasonally adjusted annual rate of 693,000 units in the latest month. This marks the highest level since September. Notably, the sales pace for February was adjusted downward, from 662,000 units to 637,000 units.
- In February 2024, new home sales surged across all US regions. The Northeast led the pack with a remarkable 27.8% increase, while the Midwest saw a 5.3% uptick. In the South, where population density is high, sales rose by 7.7%. Meanwhile, the West experienced a significant 8.6% jump in sales.
