Commercial real estate started the new year on a slow note with lower demand, smaller rent price gains, and higher vacancy rates. Office and multifamily are the two sectors that face additional headwinds this year. In these two sectors, vacancy rates are more than 0.8 percentage points higher than a year ago. Net absorption – another indicator of demand – was significantly lower in January compared to a year ago in all four main sectors of Commercial Real Estate. In fact, office space net absorption went back to negative territory. This means that more office space was vacated/available in the market than what was leased or absorbed by commercial tenants.
The year is still young. Inflation, interest rates, supply chain, and geopolitical events are the main factors that will determine how commercial real estate will perform in the following months.