24 Vital Commercial Real Estate Statistics for 2023
Commercial real estate (CRE) statistics provide investors, property managers, and business owners with insight into the history and trends of different commercial property types. This is essential when investing in a commercial property to ensure your purchase will increase in value, vacancies will remain low, and rents will increase. It can also help you budget and plan for future capital improvements. Many commercial sectors, such as medical office buildings, multifamily housing, and retail, are performing well, while the office building sector has been hit the hardest since the pandemic.
In this article, we researched 24 vital commercial real estate statistics from 2023 from 11 sectors and analyzed trends. We excluded special-purpose commercial real estate since it can overlap with other sectors.
General Commercial Real Estate Statistics
The general commercial statistics featured in this section serve as an overview of the commercial real estate market, while the rest focuses on specific CRE sectors. Despite a drop in the commercial real estate sector due to economic uncertainty and rising interest rates,commercial real estate has historically performed well. The industrial, multifamily, retail, hospitality, life sciences, and healthcare sectors perform best and may offer substantial investment opportunities.
1. Commercial real estate prices have shown signs of recovery (industrial & multifamily housing sectors are the most popular)
Commercial real estate priceshave recovered since the COVID-19 pandemic’s initial steep declines. However, there are significant regional and market segment differences in the initial price decrease and the recovery speed. Industrial properties have seen an uptick since the pandemic, with more people shopping online and needing storage.
Multifamily CRE has gained popularity due to inflated home prices and limited inventory. It’s also popular since buying a home is out of the reach of many, and households cannot afford the large down payments. Interest rate increases and economic conditions have driven more people toward renting versus owning.
2. In Q1 2023, commercial real estate is outperforming the five years before the pandemic
In the first quarter of 2023, commercial real estate isoutperforming the five years before the pandemicbegan. Since the COVID-19 pandemic, office spaces have experienced the highest vacancy rates (16.8%) and lowest rental income growth (0.7%). However, industrial real estate is experiencing the lowest vacancy rates (4.0%) and highest rent growth (16.6%) as of Q1 2023. Office building decline is attributed in part to remote and hybrid employment.
Key Takeaways About General Commercial Real Estate Statistics:
- 根据约翰常的Marcus & Millichap调查指出,辊筒y office buildings are living up to the belief that commercial real estate is facing some turbulence ahead.
- The outlook for CRE remains strong. The overall market is doing better in the first quarter of 2023 than in the five years before the pandemic.
Multifamily Sector Statistics
The commercial multifamily sector includes residential properties with five or more units, apartment complexes, and groups of multifamily complexes. Since the pandemic, it has been the second-best performing CRE sector, despite increases in vacancies and lessening demand. Inflation, rising interest rates, economic uncertainty, and housing inventory shortages have led more people toward renting since homebuying is out of reach.
3. Over 950,000 multifamily housing units are under construction in Q2 of 2023
Due to surging housing demand in 2021 and 2022,more than 469,000 multifamily housing unitswere constructed, andover 950,000 unitsare now in development into the second quarter of 2023. With slow job growth, the demand for multifamily housing will decrease.
4. Multifamily real estate investing decreased by 63.7% year-over-year (YoY)
Rising interest rates, decrease in demand and increase in vacancies, and stabilized rent values are likely the cause for a63.7% decrease YoY in multifamily real estateinvesting. However, with decreased demand, housing prices may decrease, leading to an increase in multifamily investment.
5. Multifamily vacancy rates increased to 4.4%
By Q1 2023, the vacancy rateincreased by 30 basis points (BPS) to 4.4%, and rents have leveled off. More multifamily vacancies are partly the result of increased available rental units, higher rents, unstable economic conditions, interest rates, and stricter lending standards.
Key Takeaways About the Multifamily Sector:
- Commercial real estate market statistics indicate that multifamily isa good real estate investmentdespite economic uncertainty and rising interest rates.
- More people will choose to rent rather than buy a home due to housing shortages, stagnant income, and lack of savings for a down payment.
Office Building Sector Statistics
Office buildings offer leased spaces for small to large for-profit businesses and nonprofit agencies. The office building sector has been the hardest hit since the pandemic, with more people working from home. Vacancies have increased with sharp decreases in rent growth. However, there may be opportunities to convert office buildings to mixed-use and residential dwellings.
6. Post-pandemic office building rent growth slowed to 0.7%
The office vacancy rate was 13.1% in the five years before the pandemic, but it was第一个问的16.8%uarter of 2023. Rent growth was 3.1% before the pandemic but slowed to 0.7% afterward.The worst-affected structuresare those above 100,000 square feet.
Key Takeaways About the Office Sector:
- 商业地产的统计数据显示,如果nce the COVID-19 pandemic, office buildings have suffered the most out of all commercial real estate types due to many businesses switching to totally remote or hybrid office/remote work arrangements.
- If vacancies are a concern, consider repurposing office space into a mixed-use property with a combination of retail, office, and multifamily housing or different viable combinations.
Industrial Sector Statistics
Industrial real estate is used for manufacturing, warehousing, distribution, storage, research, and assembly. The sector has outperformed all other sectors, with online shoppingcreating a need for more warehousesand storage facilities.
7. The lease rates for industrial real estate climbed approximately 6% since 2022
Despite higher interest rates, labor shortages, economic uncertainty, and the rising cost of construction materials, the industrial commercial real estate market became steady in Q1 of 2023. Lease rates per square foot of rental space haveclimbed about 6%since 2022.
Comparison of Industrial Commercial Real Estate (2022-2023) |
|||
---|---|---|---|
Quarter 1 2023
|
Quarter 4 2022
|
Quarter 1 2022
|
|
Total Inventory |
17,346.1 |
17,231.2 |
16,916.0 |
New Supply |
131.1 |
141.2 |
97.2 |
Net Absorption |
73.8 |
123.5 |
118.2 |
Overall Vacancy |
4.0% |
3.7% |
3.8% |
Under Construction |
621.8 |
657.2 |
576.5 |
Overall Asking Lease Rates (NET) |
$9.58 |
$9.07 |
$7.96 |
(Source:Colliers)
8. Supply & demand issues caused vacancy rates to rise to 4%
Vacancy rates increased to 4%due to overall supply outpacing demand, including new developments. However, commercial real estate leasing statistics indicate that with the increase in lease rates, this segment is still a solid investment within a more balanced market.
Key Takeaway About the Industrial Sector:
- The industrial real estate sector experienced extensive growth after the pandemic, but in 2023, it is expected to become more balanced with the current economic uncertainty.
Retail Sector Statistics
Retail commercial real estate is property used for commerce, such as shopping centers, malls, stores, and franchises.Retail statisticsshow that during the pandemic, ecommerce sales rapidly increased. Still, it didn’t deter general retail stores, such as clothing and grocery, from experiencing the lowest vacancy rates and thriving as people continued shifting their money.
9. General retail is experiencing the lowest vacancy rate in the sector at 2.5%
The commercial real estate statistics in the United States highlight that retail markets are experiencing an average vacancy rate of 4.2%, withgeneral retail having the lowest vacancy rate (2.5%). Discount and dollar stores have performed well, with shoppers having less disposable income. Quick-service restaurants (QSRs) and coffee chains also contribute to a low space availability rate.
U.S. Major Market Leasing Fundamentals |
||||||
---|---|---|---|---|---|---|
Type |
Total Square Feet |
Total Vacancy |
Quarter 1 2023 Net Absorption |
Quarter 1 2023 Average Rent |
Quarter to Quarter% Change |
Year to Year % Change |
General Retail |
6,403,923,637 |
2.5% |
7,260,769 |
$23.15 |
0.6% |
3.4% |
Mall |
908,729,573 |
8.8% |
(670,998) |
$23.28 |
0.6% |
3.6% |
Neighborhood Center |
2,981,007,148 |
6.2% |
1,733,840 |
$23.05 |
1.0% |
4.7% |
Power Center |
800,372,583 |
4.5% |
(37,020) |
$25.60 |
0.9% |
4.2% |
Strip Center |
703,362,673 |
4.7% |
377,445 |
$21.87 |
0.9% |
4.5% |
Other |
92,616,621 |
5.4% |
230,481 |
$28.22 |
0.9% |
4.4% |
Total Retail |
11,902,238,082 |
4.2% |
9,087,773 |
$23.96 |
0.6% |
3.8% |
(Source:JLL)
10. Shopping malls are experiencing vacancy rates of 8.8%
In contrast to discount and dollar stores, shopping malls are experiencinghigh vacancy rates (8.8%). This is also due to consumer spending changes. This has led to more bankruptcies and single-use spaces becoming available or purchased by QSRs and fast-casual restaurants.
Key Takeaways About the Retail Sector:
- 一般零售CRE最vigoro经历了us growth and will continue as more people shift their shopping habits.
- Commercial real estate price statistics show that with lower prices, online retailers and discount stores shift consumer spending as household incomes decline.
Hospitality Sector Statistics
The hospitality and leisure commercial real estate sector includes many investment types, such as lodging, restaurants, spas, and resorts. This type of real estate provides leisure services for relaxation, vacation, and enjoyment. The sector has seen increases with aYoY growth rate of 9.77%in 2023. When travel bans were lifted, more people started taking trips and vacations.
11. In the hospitality sector, lodging has an average daily rate (ADR) per occupied room of 13.6%
In 2022,U.S. revenue per available room (RevPAR) rose 8.1%from 2019, and the average daily rate (ADR) per occupied room was up 13.6%. Full-service restaurants have seen the most growth and are expected to continue. Hotels and lodging are also anticipated to continue upward with the strong urge to travel.
12. The global hospitality sector is experiencing a compound annual growth rate of 10.25%
The commercial real estate data indicates that the global hospitality sector is experiencing acompound annual growth rate (CAGR) of 10.25%, from 2022 through 2027, with 35% of that growth occurring in North America. Full-service restaurants, catering, and QSRs are also contributing to the growth of this sector since people need places to dine when they travel.
Key Takeaways About the Hospitality Sector:
- When COVID-19 travel bans were lifted, the hospitality industry experienced increased rentals, purchases, and investment.
- 消费者花在旅游和休闲post-pandemic.
- Full- and quick-service restaurants are also experiencing growth with lifted travel bans.
Commercial Land Sector Statistics
Commercial land is vacant real property typically bought and held or used for development. Most commercial land statistics focus on crops and pasture farming properties. The CRE land sector is performing well overall, with investment and appreciation increasing across all land types.
13. Sales of all land types increased to 6%
Sales of all land typesincreased to 6%, with residential, industrial, and recreational reporting an increase of 7%, up 5% from 2020. In 2022, the value of all land and buildings on farms averaged $3,800 per acre,an increase of 12.4% since 2021.
14. Cropland values increased 14.3% to $5,050 per acre
Cropland values increased14.3% to $5,050 per acre, and pasture values averaged $1,650 since 2021. This increase is good for real estate investors who want to purchase and rent farmland to startup farmers and food producers.
Key Takeaway About the Commercial Land Sector:
- Land is an excellent investment withproper business planningand due diligence because we cannot create more. However, investors, and the real estate agents who serve investors, want to research the zoning ordinances and look for growth opportunities within the land’s location.
Mixed-use Property Sector Statistics
Mixed-use property is a type of commercial real estate with multiple purposes, for example, multifamily apartments above a restaurant or retail shop. One benefit of mixed-use real estate is that the rent potential for commercial real estate is higher than for residential units, so they can offset each other in a challenging housing market.
15. Mixed-use properties provide opportunities for rents of 7% to 16% of the purchase price
A mixed-use property with both residential and commercial units can raise profits when combining the rent value of the two.Commercial rents are approximately 6% to 12%of the purchase price, whereas residential rates are between 1% and 4%.
16. Office vacancies of 16.8% provide an opportunity for creating mixed-use rentals with higher income potential
With the rapid increase in office space vacancies,rising 16.8% in Q1 2023, and hybrid employment, mixed-use properties provide an opportunity for multiple rental units and revenue streams in a sector with higher demand.
Key Takeaway About the Mix-used Sector:
- Mixed-use CRE has two or more rental types within one property and can provide a hedge against declines in commercial real estate sectors. For example, in a mixed-use building with retail and multifamily housing, investors still have rental income in the balanced subsector if one is experiencing high vacancies and the other is stable.
Healthcare & Medical Sector Statistics
Healthcare and medical commercial real estate are properties leased to medical facilities, researchers, and private practices. With people living longer, the need for quality healthcare will continue to rise. Patients also want to find care closer to home, so hospitals and private practitioners have set up care centers and offices in more urban areas, and urgent care facilities are also increasing.
17. The healthcare & medical sector historically has long-term tenants of 15 to 20 years
During 2022 and 2023, the healthcare and medical sectors have provided an opportunity for real estate investors, withtenant lease renewals of 80% or higherand steady rent increases by 2% to 3% a year. This sector historically has long-term tenants, some staying 15 to 20 years, making it an excellent investment.
18. Capitalization rates have seen an increase of 20 to 30 basis points
Medical office building capitalization rates (cap rates) have seen a steadyupward trend from Q4 2022 to Q1 2023, a rise of 20 to 30 basis points. This indicates a risk in investing in this sector, despite growing demand. It also makes it harder to secure financing.
Key Takeaways About the Healthcare & Medical Sector:
- With an aging population, increased alternative medicine, and patients wanting medical services closer to home, the healthcare and medical sectors continue to grow.
- Urgent care, small private practices, hospitals, and hospital centers provide investment opportunities.
Life Sciences Sector Statistics
Life sciences facilities are used for research and development, laboratories, biotechnology, testing cures for diseases, and creating new medicines to advance health. It saw rapid increases during the pandemic and has now become more steady. It is stillhigher than its pre-pandemic levels.
19. Life sciences facilities inventory grew by 47% over the past five years
Over the past five years, life sciences laboratory and research and development (R&D) commercial real estateinventory grew by 47%. Even while the amount of life sciences investment transactions has decreased to pre-pandemic levels and cap rates are at historic lows, investor confidence is high.
20. Around 40.2 million square feet of new construction was in progress at the end of 2022
At the close of Q4 2022,40.2 million square feet of new constructionin the life sciences sector was in progress, indicating a growing demand and substantial investment opportunity. The low cap rates and opportunity have attracted equity-driven investors who have been able to secure funding that other investors haven’t.
21. Vacancy rates increased to 6.7% in 2023
There is still a significant demand for space, but there’s also a moderate uptick of vacancy rates in the life sciences sector,increasing 170 BPS YoY to 6.7% from 5.4%in 2022. However, with the strong demand for life sciences, this vacancy increase should level off in the coming year or two.
Key Takeaways About the Life Sciences Sector:
- Commercial real estate market statistics show that life sciences saw a boom in 2021 and 2022 and leveled off in 2023. However, it is still above pre-pandemic growth.
- Life sciences will continue to be a good investment in the coming years and mayincrease by 20%over the next few years.
数据中心行业统计数据
Data centers provide data management, backup, storage, and recovery. Data centers are either owned by large companies or leased. Everything we do online is housed in a data center, so the demand for more space is increasing rapidly.
22. By 2030, data center construction spending is poised to reach $49 billion
According to McKinsey & Company, by 2030, spending for the construction of data centers will reach $49 billion. Since this is a growing trend, it’s wise for investors to get involved early on to potentially reach the highest return on investment (ROI).
23. The average asking rent for data centers increased by 14.5% YoY
Due to limited supply and strong demand in the second half of 2022 (H2), theaverage asking rental price increasedYoY by 14.5%. This increase is driven by access to a power supply and not geography, so if investors want to invest in existing data centers, they should evaluate the location. When planning to build a data center, renewable energy sources should be assessed.
24. The construction pipeline showed record low vacancy rates of 3.2%
The construction pipeline went up 153% YoY in primary markets and showedrecord low vacancy ratesof 3.2% This shows there is high demand for data centers and low available inventory, so new construction provides a strong investment opportunity.
Key Takeaways About the Data Center Sector:
- McKinsey & Company says that in 2023, greater lease agreements will be made as power requirements for data center users increase.
- Power supply issues will be the main barrier to additional growth in certain key markets. Hyper-scale demand will increase in secondary markets with less expensive land, more abundant power, and good tax incentives.
Bottom Line
Understanding the current commercial real estate statistics, climate, and trends can point investors and agents toward properties with the potential for long-term growth and profitability. Due diligence is always vital, but additional information on CRE vacancy rates, rent growth, construction, and which sectors are top performers can narrow down which properties to consider.