MarketSnapshot: Multi-Tenant Overall Market
Since the beginning of 2023, the overall multi-tenant market has seen reduced levels of quarterly sales volume compared to prior post-pandemic years. Third quarter 2024 logged nearly $37.0 billion in transactions, representing a slight increase from the previous reporting period, but activity remained very much on par with recent market averages. The multi-tenant industrial sector contributed 44% of the overall total volume, with $16.4 billion in sales volume, while office transactions contributed another $11.1 billion, and retail added approximately $9.5 billion. Year-to-date, the multi-tenant market has posted more than $110.4 billion in sales volume, but without a significant uptick in momentum to close out the year, 2024 totals will not exceed last year’s performance.
Cap rates, since mid-2022, have been steadily rising for multi-tenant transactions. At the close of third quarter 2024, the overall average reached 7.04%, surpassing the 7.0% mark for the first time in 10 years. By sector, industrial cap rates remain the lowest at 6.30% despite reporting a 25-basis point jump in the last three months. The multi-tenant retail sector has seen consistently modest increases in recent quarters, and now sits at an average of 7.19%. The office sector, on the other hand, has reported steeper increases in the last two years and is the market’s highest average at 7.35%. This rate represents a two-basis point decline from second quarter.
After a noticeable increase in activity during 2023, international investors have pulled back in the last nine months across all multi-tenant asset types. In their place, we’ve seen both REITs and institutional investors regain some of their historic market share. Still, private investors make up the predominant buyer group, with 56% overall market share year-to-date. This trend holds true for each of the property sectors as well, with private individuals and entities representing between one-half and two-thirds of active buyers. Institutional investors seem to have their sights set on multi-tenant office and industrial product, whereas REITs have been acquiring shopping centers more frequently than other asset types.
