By Jack Stubbs
As the calendar year recently reached its halfway point – and with the third quarter well underway – there is now an opportunity to take stock of the current state of the commercial real estate market on a national scale. Across the board, some of the primary trends include decreasing average listing pricing, a slowdown of new inventory being added to the market, increasing occupancy rates, and lower lease rates.
Commercial Real Estate Exchange, Inc. (Crexi) recently released its June 2023 National Commercial Real Estate report, which analyzed overall national sales and leasing trends, asset type trends (average asking price per square foot month-over-month changes) and a regional, market-by-market breakdown of commercial real estate trends.
In terms of national sales trends, average listing prices dipped 0.7 percent from May to June, which represented a fourth consecutive month of minimal decrease in listing prices. Meanwhile, there was a nearly 24 percent decrease in the total amount of inventory added in June since May.
There were some noteworthy findings with regards to the highest asking price by metropolitan area, according to the report.
On the West Coast, San Jose took second place in the rankings, with an average price per square foot of $602.80 (behind only New York, which posted an average price per square foot of $802.06) – this reflected a 6.17 percent month-over-month increase.
San Francisco came in third, posting a figure of $541.71 per square foot (a 2.59 percent increase). Meanwhile, Los Angeles had an average price per square foot of $497.98 (just over 12 percent increase) and San Diego, at $456.25 per square foot, saw a nearly 20 percent month-over-month decrease.
In the Pacific Northwest, Seattle posted an average price per square foot of $389.08 (a nearly 16.5 percent decrease) and Portland posted $320.51 per square foot, marking a roughly 2.3 percent increase.
Looking at a regional, market-by-market breakdown, Crexi’s findings shed further light on commercial real estate buyer search activity, which increased across 90 percent of major U.S. cities – Houston remained in the first in the rankings, despite a two percent decrease in search activity compared to May, notes the report. Los Angeles and Dallas ranked second and third, respectively, with buyer search inquiries up 2.7 percent and 4.3 percent.
From a leasing perspective, Houston rental searches increased by 7.9 percent compared to the activity in May, while Atlanta saw tenant searches increase by nearly 28 percent. On the West Coast, Los Angeles – which came second in the rankings overall – saw a 1.4 percent decrease in lease activity.
Crexi’s report also analyzed month-over-month changes in average asking price per square foot for industrial, land, multifamily, office and retail properties.
Industrial ($164.24 per square foot) and land ($238.60 per square foot) posted the most significant pricing gains month-over-month, with 8.14 percent change and $12.81 percent change, respectively. Meanwhile, multifamily properties on average saw a decrease in pricing by 11.3 percent month-over-month; while retail (0.66 percent) and office (2.31 percent) posted relatively small increases.
An analysis of overall national leasing trends shed further light on the overall state of the commercial real estate market in the middle of 2023. Across the U.S., average leasing rates fell by 5.5 percent (to $1.16 per square foot), a trajectory that marked the lowest average leasing rate since June 2021.
Looking at different asset types, industrial asking rents (per square foot) decreased by almost 7 percent month-over-month, while office asking rents saw a marginally greater decrease of 7.9 percent.
