NAR reveals top 10 commercial real estate markets in the US
Several affordable metros have been hailed as the premier commercial real estate (CRE) markets by the National Association of Realtors (NAR) and are expected to outperform the rest of the country in attracting new residents.
NAR announced the top 10 CRE markets during its Commercial Real Estate Forecast Summit including (in alphabetical order):
- Austin-Round Rock, Texas
- Cape Coral Fort Myers, Florida
- Charleston-North Charleston, South Carolina
- Las Vegas Henderson Paradise, Nevada
- Nashville-Davidson-Murfreesboro-Franklin, Tennessee
- Phoenix-Mesa-Scottsdale, Arizona
- Raleigh, North Carolina
- Salt Lake City, Utah
- Seattle-Tacoma-Bellevue, Washington
- Tucson, Arizona
NAR chief economist Lawrence Yun said these growing markets have affordability as a common factor. “They offer much lower office and retail rents and are therefore able to attract new and expanding businesses,” he said.
Calvin Schnure, senior vice president of research and economic analysis at Nareit, said that despite the pandemic, REITs performed well overall in 2021, although this varies by market segment.
“The effects of the pandemic on commercial real estate are very different depending on the type of property. REITs were resilient when the crisis hit because of their strong balance sheets and liquidity, as well as their solid operational fundamentals, ”he said. “Some sectors are harder hit, especially housing, resorts and retail REITs, while sectors that support the digital economy – including data centers, cell towers, and industrial and logistics facilities – saw increasing demand.”
Yun sees a bright future for the CRE sector. He forecast a steady uptake of commercial property and low vacancy rates through to the end of the year thanks to the recovering economy and continued employment growth.
Gay Cororaton, senior economist and director of housing and commercial research at NAR, shared Yun’s views. He believes the multi-family, industrial and retail sectors will drive the commercial real estate recovery this year. However, he said it could take longer for office uses to reach pre-COVID levels.
“Apartment buildings and industry remain the bright spots of the commercial market. Given the large differences in commercial and residential rents in the metro areas, development will focus on cheaper markets closer to gateway cities, ”said Cororaton. “However, despite the full recovery in office jobs, office vacancy rates will continue to rise through mid-2022 due to the shift towards a nationwide work-from-home culture.”
“I expect continued fallout for retailers,” added Brandon Hardin, economist at NAR Research. “And as tactical store closures and bankruptcies increase, adaptive reuse and conversions create opportunities for investors and developers.”