The commercial real estate market has experienced significant changes over the past several years. Shifts in how people work, shop and relocate have reshaped demand across nearly every property sector. While transaction volume, leasing activity and occupancy rates tell part of the story, they often reflect conditions after trends have already taken hold.
That's why the National Association of REALTORS® developed its new Commercial Real Estate Demand Index, a quarterly measure designed to identify the local economic conditions that typically drive future demand for commercial space.
"The commercial real estate market doesn't change overnight," says Nadia Evangelou, NAR principal economist and director of research. "Before demand increases for office buildings, warehouses, shopping centers or apartments, it usually shows up first in the local economy. Businesses hire, people move in, and jobs are created. Those changes eventually create demand for commercial space."
Rather than tracking vacancies or lease activity, the index measures the economic drivers behind future demand across more than 300 metropolitan areas. It evaluates four major commercial property sectors:
- Office: Growth in professional and business services employment
- Industrial: Manufacturing, transportation, and warehousing employment growth
- Retail: Growth in retail trade and leisure and hospitality employment
- Multifamily: Population growth and domestic and international migration
Agent Takeaway
Commercial real estate demand often begins long before a lease is signed or a new development breaks ground. Employment growth, business expansion, population gains and migration trends can offer some of the earliest clues about where future opportunities may emerge. NAR's new Commercial Real Estate Demand Index gives REALTORS® a way to monitor those underlying economic drivers and compare their markets against more than 300 metro areas nationwide.
By tracking local momentum alongside traditional commercial real estate metrics, practitioners may be better positioned to identify emerging opportunities, advise clients and stay ahead of market shifts.
Understanding the index is straightforward: A score of 100 represents the average U.S. metro area. Markets above 100 are experiencing stronger-than-average growth in the economic drivers that fuel commercial real estate demand, while markets below 100 are growing more slowly than average, though they may still be adding jobs and residents. The higher the score, the stronger the local momentum.
Other Trends Real Estate Pros Should Watch
Broad-Based Growth Is Winning
One of the biggest findings from the inaugural index is that the strongest-performing markets are succeeding across multiple sectors rather than relying on a single industry.
For example, St. George, Utah, ranks first overall with a score of 128, benefiting from strong office employment growth, continued population gains, and above-average industrial demand. Fayetteville-Springdale-Rogers, Ark. (125) and Huntsville, Ala. (125) follow closely behind, each demonstrating strength across several commercial property categories.
"The markets that stand out perform well in more than one commercial real estate sector," Evangelou says. "This isn't simply a story of one employer, one industry, or one property type driving growth."
Other top-performing markets include:
- Ocala, Fla. (123)
- Raleigh-Cary, N.C. (121)
- Sherman-Denison, Texas (121)
- Lakeland-Winter Haven, Fla. (121)
- Grand Forks, N.D.-Minn. (121)
Many of these metros may not generate the same attention as larger gateway cities, but they are posting some of the strongest economic momentum in the country.
Pandemic-Era Growth Is Normalizing
The index also reveals how commercial real estate demand has evolved since the migration surge that followed the pandemic. Austin, Texas, remains one of the country's strongest markets, but the extraordinary pace of growth that placed it among the nation's top performers in 2022 has slowed. Several Florida metros have followed a similar pattern.
According to Evangelou, the change does not signal economic decline.
"Most of these markets are still growing," she says. "People are still moving to Florida. But the momentum that drove these markets to expand a few years ago has slowed, returning to more normal conditions."
The data suggests that while many Sun Belt markets remain healthy, the competitive advantage they enjoyed during the height of the migration boom has narrowed as growth patterns become more balanced across the country.
The Carolinas Continue to Climb
While some pandemic-era hotspots have cooled, the Carolinas have continued gaining momentum.
South Carolina now ranks as the strongest state overall in the index, while North Carolina has steadily strengthened in recent years. Raleigh, Charlotte, Wilmington, and Spartanburg are all benefiting from continued population growth and job creation.
"Whatever attracted people to Florida in 2021 seems to be attracting them to the Carolinas now," Evangelou notes.
For commercial practitioners, those migration patterns matter. New residents create demand for apartments, retail corridors, office space, healthcare facilities, and industrial development, often generating opportunities across multiple property sectors at the same time.
Small Markets Are Making Big Moves
Some of the most notable gains are occurring in markets that rarely receive national attention.
Grand Forks, N.D., has posted one of the largest improvements since 2022 and now ranks among the country's top-performing markets. Fort Collins, Colo.; Lexington Park, Md.; and Lake Charles, La., have also recorded significant gains.
"These are smaller markets, and a good year in a place like Grand Forks probably won't show up in national numbers," Evangelou says. "But locally, a shift like that matters a lot. It can make the difference between space sitting empty and space getting leased."
The findings highlight why local economic indicators often matter more than national trends when evaluating commercial market opportunities.
A Mixed Picture for Gateway Markets
The index paints a mixed picture for many of the nation's largest metropolitan areas.
San Francisco, which experienced some of the sharpest economic headwinds following the pandemic, has shown signs of improvement over the past year. Other major gateway markets, including New York, Washington, D.C., Boston, and Los Angeles, continue to trail the national average.
While some recovery is underway, the data suggests that growth remains uneven and highly dependent on local economic conditions.
"The index measures the local economic conditions that generate demand for space, not vacancy, rents or absorption," Evangelou notes. "It provides a way to compare markets with one another and identify where momentum is building."
