A combination of factors is leading to a perceptible slowdown in the national office real estate market, according to a comprehensive new report just released by the National Association of Realtors. The Commercial Market Insights Report notes that going into the third quarter of 2022, the office sector is struggling: “Although more people returned to their offices, after four quarters with positive net absorption, demand for office space dropped as net absorption turned negative again.” At the same time the “industrial boom continues to show no signs of stopping,” while the demand for multifamily housing remains fairly strong. In fact, industrial sector net absorption is at nearly 425 million square feet as of early fall. Although demand in the industrial sector may have tapered in recent months, says the report, the “volume of industrial space absorbed continues to be double that of pre-pandemic times.” Both Phoenix and Denver are listed among the top ten areas nationally with the strongest industrial sector absorption. Phoenix is seeing 23.4 million square feet net absorption, while the Mile High City’s numbers came in at 12.7 million. Most of the top 10 areas with the slowest year-to-year absorption were on either the East or West coast, although Colorado Springs saw a decline of 429,000 square feet. Although the spending power of consumers nationally has continued to decrease heading into late 2022, retail sector real estate remains strong. In fact, the overall worth of this market sector was up to $383 billion as of August. That figure is a strong 19% improvement over where things stood in the pre-pandemic month of August 2019. This means that net absorption in the retail sector has now been on the positive side for seven quarters in a row, with the quarter ending in September coming in at 23.2 million square feet. “General retail and neighborhood centers have driven the demand,” says the report, “accounting for nearly 90% of the net absorption.” The problematic office sector, meanwhile, is lagging. As of late this summer, some 6.5% of employed persons were still teleworking because of the Covid 19 pandemic. Although this sector saw four quarters on the plus side, from mid-2021 to mid-2022, “demand for office space dropped as net absorption turned negative again.” In a press release accompanying the latest NAR report, it was noted that “inflation, interest rates, supply chain, and geopolitical events are the main factors that will determine how commercial real estate will perform in the following months.” By Garry Boulard
0 Comments
Your comment will be posted after it is approved.
Leave a Reply. |
Get stories like these right to your inbox.
|