Amid a slowing economy, REALTORS® reported modest activity in sales, leasing, and development according to NAR’s 2019 Q3 Commercial Real Estate Trends & Outlook Report. REALTORS® are mostly engaged in the sale, leasing, and development of properties valued at less than $2.5 million.


Total sales volume in 2019 Q3 rose at a modest pace of 3% from a year ago. Sales growth has moderated since 2017 compared to the almost 10 percent growth per year since 2012 through 2016.

Chart showing Cap rates in 2019 Q3

By asset class, respondents reported strong sales in apartment and industrial markets. The median going-in cap rates for all property types was 6.6%, with apartment properties having the lowest median cap rate, at 5.9%, followed by industrial warehouse, at 6.5%. Retail strip centers had the highest cap rate, at 7.1%. Cap rates continue to decline, especially for apartments and industrial properties given the demand for these types of properties (falling cap rates = rising prices).

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NAR members, including those with specialized commercial designations (CCIM, CRE, CPM, ALC and SIOR) reported a modest annual gain of 2.4% in leasing volume in 2019 Q3. Vacancy rates in the small commercial real estate market continued to trend down in this quarter. The lowest median vacancy rates were in apartment and industrial properties, at 5%. REALTORS® reported high vacancy rates in retail properties, at 9%, and office properties, at 10%.

Chart showing median vacancy rates in 2019 q3

The US Census Bureau reported in 2019 Q2, that the national rental vacancy rate was 6.8%, well below the 9% rate in 2012. With low vacancy rates, rents rose on average by 3.8% in 2019 Q2 from one year ago.


NAR members on average reported that construction activity rose at a modest pace of 4% percent in 2019 Q3 from year ago levels. The pace of construction activity peaked in 2016 and has tapered since then.

chart showing value of construction put in place (SAAR in millions)

As of August 2019, the U.S. Census Bureau reported that the seasonalized annual value of construction put in place for office, lodging, and multifamily structures increased compared to one year ago, but it decreased for commercial properties (buildings for wholesale, retail, and selected service industries).

By property type, respondents reported the strongest annual increase in Class A apartment properties, Class A hotels/hospitality, Class B/C apartments, and Class A industrial warehouses. Respondents reported a decline in construction activity for retail malls.

Outlook and Opportunities

Amid concerns about an economic slowdown, 48% of respondents reported they expect business conditions to improve in the next 12 months, slightly lower when compared to 53% of respondents in the 2019 Q2 survey. Members identified several market opportunities, such as the construction of affordable housing, industrial-flex office, repurposing and rehabilitation of closed retail malls, and senior housing, among others.

chart showing commercial market opportunities and market challenges

Generally speaking, multi-family and industrial will continue to be strong commercial asset classes. The multifamily market is expected to remain bright in metros with low vacancy rates and affordable rents. E-commerce will continue to sustain demand for industrial properties, particularly flex properties. Retail brick and mortar will continue to do well in growing metros and in retail niches that require face-to-face customer service. The office market will be sustained by the growth in technology-driven jobs. The Opportunity Zone tax break on capital gains is expected to bolster commercial and residential real estate sales in 2019-2020.


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