Economists' Outlook

Housing stats and analysis from NAR's research experts.

Top 10 Metro Areas With the Strongest Commercial Market Conditions

On the aggregate, the commercial real estate market has been hit hard by measures to control the COVID-19 pandemic. However, on closer look, some sectors and geographic markets have fared better than others. By property type, the multifamily and industrial property markets have held up better to the pandemic's onslaught than the office, retail, and hotel sectors. Regarding the office market, the large metro areas and central business districts have experienced larger declines in occupancy compared to the smaller metro markets and suburban locales.1

Real estate transactions are heavily dependent on the economic, demographic, housing, and commercial market conditions that are specific to a local area. Based on these factors, the National Association of REALTORS® identified the top 10 markets with stronger economic and commercial market conditions compared to national conditions, among the 52 markets for which NAR has commercial market data.2

Top 10 Commercial Markets 2021

In identifying these markets, NAR considered 25 indicators based on the latest data as of 2020 Q4 on the area’s economic, demographic, housing, and commercial market conditions in the multifamily, office, industrial, retail, and hotel property sectors:

Economic: GDP growth, non-farm employment, unemployment rate, weekly wages, median household income, consumer spending (credit card spending), number of business openings

Demographic: population growth, net domestic migration

Housing: homeownership rate, rental vacancy rate, building permits, ratio of jobs created to housing permits, apartment rent

Commercial indicators by property type: net absorption, vacancy rate, asking rent, inventory, construction

The table below shows indicators on vacancy rates and rent that best reflect the commercial demand conditions in these markets. Download all indicators for each metro area.

Table: Indicators on Vacancy Rates

Below are the top 10 markets in alphabetical order:

Austin-Round Rock, TX

Austin is a huge magnet for movers, second only to Phoenix. With an influx of movers, the apartment vacancy rate is a low 3%, about half the national vacancy rate (6.5%). The low vacancy rate creates a significant opportunity for Austin's multifamily property market. Austin is also becoming a strong industrial player, experiencing a significant increase in industrial construction of 6.1 million sq. ft., equivalent to 13% of the current industrial space, the largest increase among the top 10 markets. In 2020, industrial space occupancy increased by 1.8 million, offsetting the decline in office vacancy of about 540,000 sq. ft. Among the top 10, it also has the lowest decline in payroll employment as of December 2020, at 1% compared to the national decline (-6%).

Cape Coral-Fort Myers, FL

Cape Coral might be known as a tourist destination, but its office and industrial markets are holding up to the pandemic’s negative impact. It is one of two metro areas that experienced an increase in office occupancy of $112,000 sq. ft. as of 2020 Q4 along with Raleigh, North Carolina. The office vacancy rate was 5.7%, about a third of the national rate (15.5%). Cape Coral is likely to continue to attract new office tenants because among those in the top 10, it has the lowest office rent, at $19.6 sq. ft., which is 56% of the national average asking office rent ($35 sq. ft.). It is also experiencing strong demand for industrial properties, relative to supply, with a vacancy rate of 3.4% that is below the national rate (5.2%). The low industrial vacancy rate means more industrial construction is likely in the future. Nonfarm payroll employment is down just 4%, even with the 20% decline in hotel and leisure employment.

Charleston-North Charleston, SC

Charleston makes it to the top commercial markets because of its strong economic growth of 3% in 2019 compared to the US economy (2.2%). It is experiencing a lower unemployment rate of 4.1% as of December 2020 compared to the national rate (6.7%). Office vacancy rate was 9.4%, which is lower than the national average (15.5%). While its economy is being impacted by the decline in hotel and leisure business, the construction of industrial properties is buoying up the economy, with 2 million sq. ft. under construction, or 2% of the current industrial space.

Las Vegas- Henderson-Paradise, NV

Las Vegas is experiencing significant loss in hotel/leisure and employment business, but it has a booming industrial property market. In 2020 Q4, industrial occupancy increased by 2.2 million sq. ft., second to Phoenix (7.7 million sq. ft.), among those in the top 10 list. Another 6.3 million sq. ft. is currently under construction, accounting for 4% of the total inventory of industrial space. There is significant opportunity for the Las Vegas multifamily property market because the rental vacancy rate is a low 2.9%, about half the national rate (6.5%). The median apartment rent as of December 2020 was $1,302, or 37% of wages.

Nashville-Davidson-Murfreesboro-Franklin, TN

Despite the decline in hotel and leisure employment, Nashville's economy is withstanding the pandemic hit because of its strong industrial property market. Among the top 10, it ranks third in terms of the square feet of industrial projects under construction (behind Phoenix and Austin), with 5.8 million sq. ft. under construction or 2.6% expansion of the current industrial space. With a strong industrial sector, non-farm payroll employment declined by 4% as of December 2020, below the national rate (6%), even as leisure/hospitality employment fell by 23%.

Phoenix-Mesa-Scottsdale, AZ

Phoenix stands out in several aspects. Among the top 10 metros, it had the largest net domestic migration in 2019, at 72,000 in 2019. Non-farm employment was down just 2.3% as of December 2020 (6% nationally). With strong domestic migration, the rental vacancy is at 3.9%, lower than the national rate, indicating a demand for more multifamily housing. Among the top 10, it ranked first in absorbing new industrial space of 7.7 million square feet in 2020. However, with the buildup of industrial space, the industrial vacancy rate has increased to 8.1%, which is higher than the national rate (5.2%), but this should also bring down the asking price of industrial space, at $7.7 per sq. ft., which is higher than the national average ($5.2 per sq. ft.).

Raleigh, NC

Raleigh made it to the top 10 because of the overall strength of its economy, demand for multifamily housing, and relatively inexpensive asking office rent. Raleigh's economy rose 3% in 2019, above the national growth rate (2.2%). As of 2020 Q4, the apartment vacancy rate stood at 2.5%, well below the national rate (6.5%), a clear signal for investors to go into multifamily housing. The Raleigh market is good for doing business—the average asking office rent is $27 per sq. ft., below the national average ($35 per sq. ft.), with a vacancy rate of 10.2%, which is also below the national average (15.5%).

Salt Lake City, UT

Salt Lake City makes it to the list for having the lowest decline in non-farm employment at just about half a percent and the lowest unemployment rate of 3.6% among the 52 markets. However, the booming economy has increased the demand for rental housing, with a rental vacancy rate of 5.5% and with households spending 31% of weekly wages on a typical apartment rent of $1,257. However, rent is still relatively cheaper than in areas like San Jose ($2,129), San Francisco ($1,997), or Los Angeles ($1,840), so Salt Lake City has the potential to attract more movers, increasing the demand for housing. Office asking rent is relatively cheaper, at $27 per sq. ft. compared to tech metro areas like San Francisco $ ($50 per sq. ft.).

Seattle-Tacoma-Bellevue, WA

The Seattle metro area makes it to the top 10 given its strong economic growth and the opportunity for multifamily expansion. Among the 52 metro areas, its economy expanded at the fastest pace at 5.1% in 2019, more than double the national pace (2.2%). With that economic expansion came a demand for housing. As of 2020 Q4, the rental vacancy rate stood at 4.4%, which means more housing construction is needed. The industrial vacancy rate of 4.5% is also lower than the national rate (5.2%), so there’s still potential for some expansion in the industrial market.

Tucson, AZ

With its low office and apartment rent, Tucson has a huge potential to attract businesses and residents. Its net domestic migration is about 12% the size of the net domestic migration into Phoenix, but the cheaper cost of housing and office rent can attract more people and businesses into the area in the future. Office occupancy increased in 2019 by 101,950, one of a few metros in the top 10 list to experience positive net absorption (along with Raleigh and Cape Coral Fort Myers). Office space is relatively inexpensive, at $20.5 per sq. ft., compared to Phoenix ($28.1 per sq. ft.). The median apartment rent as of December 2020 was $1,124, compared to $1,338 in Phoenix.

1 See NAR’s February 2021 Commercial Market Insights Report.

2 Office and industrial property market data is from Cushman and Wakefield. Multifamily rent data is from and rental vacancy rate is from the US Census Bureau. Credit card data is from Affinity Solutions via Opportunity Insights downloaded from Haver Analytics. Employment data is from the Bureau of Labor Statistics, GDP data is from the Bureau of Economic Analysis, and net domestic migration data is from the U.S. Census Bureau.