Commercial Real Estate Hits Historic Lows:
Navigating the Current Market Reality
The commercial real estate landscape is experiencing a significant shift, with transaction activity
dropping to levels not witnessed in over a decade. According to a recent Altus Group report
analyzing single-property, non-distressed sales across major commercial sectors, the market
has reached a critical juncture that demands attention from industry professionals.
Market Performance at a Crossroads
The current state of CRE transactions paints a sobering picture. We’re seeing transaction
volumes that harken back to the post-Great Recession era, with 2024 marking several
unwanted milestones:
- Transaction counts have fallen to their lowest level since 2011
- Dollar volume has decreased to figures not seen since 2013
- Square footage transactions have dipped to 2010 levels
While these metrics might raise immediate concerns, there’s a silver lining: the all-sector
average price per square foot showed resilience with a 1.2% quarter-over-quarter increase in
Q3, though still tracking 1.6% below last year’s figures.
Sector-by-Sector Breakdown
Quarterly Performance
The third quarter brought challenging conditions across most sectors:
- Multifamily led the decline with a 12.3% drop in transactions
- Office space continued its struggle, down 11.5%
- Both retail and industrial sectors experienced approximately 10% decreases
- Hospitality emerged as the lone bright spot, posting a surprising 9.2% increase
- Commercial general remained relatively stable with only a 5.5% decline
Annual Perspective
Year-over-year comparisons reveal widespread weakness:
- Office space bore the brunt with a 15.4% decline
- Multifamily followed with an 11.4% decrease
- Retail (-8.7%) and industrial (-5.6%) showed significant softness
- Even hospitality, despite recent quarterly gains, recorded a 6.5% annual decline
Notable Exceptions and Opportunities
The office sector, despite its overall challenges, has shown unexpected strength in certain
metrics. Dollar volumes increased by 15.5% quarterly and 20.8% annually, standing out as a
rare positive indicator in the current market. However, this appears to be an isolated bright
spot, as other sectors continue to face headwinds:
- Multifamily assets experienced a substantial 21.3% value decline
- Hospitality values dropped by 18.4%
- Square footage transactions in multifamily plummeted 18.1%
- Industrial space saw a 15.9% reduction in square footage traded
Looking Ahead
While some market analysts suggest we’re approaching a bottom, making this potentially an
attractive entry point for investors, the data indicates ongoing market volatility. The parallels to
post-Great Recession metrics serve as both a warning and a reminder that market cycles
eventually turn. For CRE professionals, this environment demands a strategic approach: careful
asset selection, thorough due diligence, and perhaps most importantly, patience.
Those who can identify value opportunities while maintaining disciplined underwriting standards may find themselves well-positioned when the market inevitably stabilizes.
About the author: Myles Lichtenberg, Esq., is the Owner & Chief Title Insurance Officer at MylesTitle. MylesTitle provides oversight of sophisticated due diligence services performed by a highly experienced underwriting team of attorneys and paraprofessionals who are supported by dedicated administrative personnel educated to smoothly close the following types of commercial properties and property financings: vacant land, office, retail, multi-family, industrial, hotel and special purpose. Beginning with your initial contact to your dedicated title service representative, through the post-closing process, MylesTitle will remain accessible and accountable to you for all matters relating to your transaction.
