The Atlanta Fed’s Commercial Real Estate Market Index (CREMI) provides information about general commercial real estate (CRE) conditions in more than 350 US cities and adjacent communities. The high-level view of multiple asset types—hospitality, industrial, multifamily, office and retail—serves as a starting point for assessing market risk and performance.
Commercial real estate conditions remained mixed. The average sector score shows hospitality (21 percent), industrial (14 percent), and retail (32 percent) performing above their long-term average. Multifamily and office metrics continue to lag, running 7 percent and 26 percent below their long-term average, respectively (see table 1).
Table 1: CRE Segments and Their Performance against Long-Term Averages
Source: Federal Reserve Bank of Atlanta’s CREMI
Of the more than 350 US markets sampled in CREMI, hospitality (90 percent), industrial (72 percent), and retail (86 percent) markets are performing above their long-term average indicating largely positive performance (see table 2). In contrast, the share of multifamily (35 percent) and office (15 percent) that are performing above their long-term average indicates that fewer markets are performing well on a relative long-term basis. Most multifamily (56 percent) and office (79 percent) are performing below their long-term average, indicating lagging performance.
Table 2: CRE Segments’ Long-Term Average Performances
Source: Federal Reserve Bank of Atlanta’s CREMI
Here are some observations about each CRE sector and its performance:
Hospitality (21 percent above long-term average performance)
- Healthy business travel continues to lead to improvements in revenue per available room (RevPAR) at upper-end hotel segments.
- Cost-conscious consumers are influencing lower-tier hotel segments.
Industrial (14 percent above)
- Increasing vacancy rates are influencing industrial conditions. These vacancy rates are rebounding from the significant lows encountered in 2022, which were brought about by greater levels of construction.
Multifamily (7 percent below)
- Multifamily conditions continue to be challenged by a combination of oversupply (in the luxury/high-end segments) and affordability issues.
Office (26 percent below)
- Office conditions continue to be affected by a combination of remote work, shortage of workers, and oversupply.
- Lower-tier office buildings appear to be facing the brunt of the ongoing changes that the office sector is encountering.
Retail (32 percent above)
- Overall retail sector conditions remain generally healthy as factors such as vacancy rates are at muted levels due to robust leasing and minimal amounts of new construction.
Conclusion
CREMI results show a dispersion of relative performance across asset classes for the second quarter of 2024. Oversupply factors in office and multifamily have led many markets to underperform their respective index’s long-term average. Consumer behavior, overall balanced supply, and economic health have led to many markets in retail, hospitality, and industrial outperforming their respective CREMI long-term average. Interested in tracking a specific market and asset class performance? Click here to learn more.
Brian Bailey
A subject matter expert in commercial real estate, Supervision and Regulation
The Federal Reserve Bank of Atlanta