Retail Leads October CRE Gains as Office Stabilizes and Industrial Normalizes
The CRE landscape showed diverging trends in October, with retail continuing to outperform, office recovery remaining selective, industrial normalizing after a supply surge, and multifamily adjusting to late-cycle supply pressures, according to Crexi’s October CRE report.
Retail was the strongest-performing sector for the month. Sold pricing jumped 8.49% from September to $237.93 per square foot, a 19.13% year-over-year increase. The gain extends a three-month run of elevated growth since July, reflecting sustained investor confidence despite broader economic uncertainty. Sale cap rates rose slightly, increasing six basis points to 6.63%, suggesting a modest softening in sentiment and pricing expectations.
While retail vacancy rose 50 basis points month over month, it remains 330 basis points tighter than a year earlier, supported by experiential concepts and omnichannel strategies. At 5.5%, retail vacancy is still near historic lows. Effective rents climbed 2.03%, and asking rents were essentially unchanged at $19.06 per square foot. According to the report, the widening gap between asking and effective rents indicates landlords are pushing through increases in high-demand locations while keeping headline rates stable to attract tenants.
In the office sector, leasing concessions remain elevated, though higher-quality assets continue to draw buyers. Sale prices rose 2.09% month over month and 13.38% year over year to $177.14 per square foot—the strongest annual pricing gain since the pandemic. Sale cap rates compressed 8 basis points, pointing to selective “risk-on” bidding for premium assets. The 38-basis-point compression from October 2024 marks one of the strongest year-over-year improvements across all property types. Despite this, effective lease rates fell 1.65% as landlords rely on concessions to retain tenants while maintaining face rates for valuation and financing purposes. Vacancy decreased 250 basis points from September.
Industrial conditions continued to normalize after significant deliveries earlier in the cycle. For-sale pricing declined 3.58% from September to $104.66 per square foot but remained 1.63% higher than a year ago. Sale cap rates dipped two basis points, underscoring continued investor interest. Vacancy climbed 280 basis points to 25.8%, driven by new supply rather than weakening demand. Effective rents increased 0.94%, while asking rents stayed flat.
Multifamily is nearing the peak of its supply wave, with construction starts down 74%. The sector posted the strongest monthly pricing increase in October, with sale prices up 4.74% to $209.34 per square foot—a 1.26% year-over-year gain. Sale cap rates fell five basis points to 6.38%, suggesting renewed investor interest. Listed vacancy increased 120 basis points month over month and 70 basis points year over year to 14.3%, reflecting absorption of record new supply rather than demand erosion, according to the report.
Source: GlobeSt/ALM