Headlines

What’s new in the world of Real Estate

• Office space vacancy hit a record high

• Industrial vacancy is also rising

• The hottest housing market for 2024

• Rents fell nationwide for the third straight month

Plus: People are feeling better about mortgage rates, homebuying demand is up, a proptech company lays off its whole staff on Google Meet, and more.

Listing of the week: A baseball stadium in Illinois.

Performance

Market Updates

The national office space vacancy rate hit 19.6%, the highest level on record. This comes from a report from Moody’s Analytics, which had previously recorded highs of 19.3% in 1986 and 1991. The rate jumped 0.4% last quarter, the highest increase in nearly three years, bringing the office market into “uncharted territory”. With hybrid and remote work here to stay, the long-term outlook for office buildings is hazy, and suburban building owners are responding by converting office space into industrial space, such as warehouses, distribution centers, and storage facilities. The conversion rate has risen by 33.7% in the past two years, as demand for office space has declined.

Meanwhile, industrial space is also seeing higher vacancy rates. For the first time in three years, the vacancy rate exceeded 5%, according to a report from real estate firm Cushman & Wakefield. Last quarter, the rate rose by 0.6%, but it is still below the 15-year average of 6.4%. Because of industrial real estate’s relatively strong performance the past few years, new construction ramped up to meet the demand, rising by 17.6% in 2023. That, along with slightly lowered demand, has seen rent growth drop for the fifth straight quarter, another indication that the market has slowed, and likely will continue to slow in 2024.

Buffalo, New York, leads Zillow’s list of the hottest housing markets for 2024. The list looked at the 50 biggest U.S. metro areas and is based on metrics such as the days a listing stays on market, projected home appreciation and projected job growth - the latter metric being the one that pushed Buffalo to the top spot. It is followed by Cincinnati, Ohio and Columbus, Ohio, as more affordable markets in the Great Lakes and Midwest dominated the rankings. Last year’s #1 market, Charlotte, dropped to 7th, while San Antonio took the biggest drop, from 13th all the way to 49th.

The median U.S. asking rent fell for the third straight month. Redfin’s rental report showed a -0.2% decline in rents nationwide, representing a -0.8% drop year-over-year - a huge change from the 10-15% range in most of 2022 . Higher supply due to new construction has helped renters, and if mortgage rates fall and incentivizes some renters to become buyers, rental demand could drop in 2024, further reducing prices. It is region-dependent, however, as rents actually rose in the Midwest and Northeast while they fell in the South and West. For rental property investors, it is always advisable to acquire property in high-demand areas that are less sensitive to rising supply concerns.