The first quarter of 2022 may have technically been a winter-to-spring transition, but CRE metro markets were particularly hot in the Sun Belt and West, with Florida walking away with the top five out of 16 markets.
That’s according to the National Association of Realtors’ Commercial Real Estate Metro Market Conditions Index. Only one market—Boston—was outside of those regions.
The organization says that the index, which shows relative performance, “is calculated using 25 variables pertaining to the metro area’s economic conditions (job growth, unemployment rate, wage growth), demographic conditions (net domestic migration, population growth), commercial market conditions for multifamily, office, industrial, and retail property sectors (vacancy rate, absorption, rent growth, cap rate, professional/business services, and retail trade job growth) and employment conditions in the hotel/lodging industry (job growth, share of leisure and hospitality workers to total employment)”
An index number for an area above 50 means that market conditions were stronger than a national average while one below 50 means weaker. The index combines upwards of 25 variables, depending on what information is available.
Some of the market variables include changes in non-farm employment and unemployment rate, GDP growth, population growth, changes in apartment rents; rent to income share, new office space leasing, net absorption of office and industrial; and changes in jobs in specific sectors. A score of 80 or above means an area is outperforming on at least 20 out of the 25 areas.
So, for example, Orlando-Kissimmee-Sanford, Florida, the top-rated metro, outperformed the US overall on 21 out of the 25 variables and landed with an 84 index. Wages were up 9%; 10,000 people migrated there from other states; office vacancies were 8% versus 12.2% nationally; multifamily asking rents were up 25% compared to the national 11.4%; industrial vacancy rate was 3.6% versus 4.1% national; and retail vacancy was 3.8%, where the nation’s average was 4.5%.
That was the only index score of 80 or above. The other top four locations, all in Florida, were Miami-Miami Beach-Kendall (76); West Palm Beach-Boca Raton-Delray Beach (76); Fort Lauderdale-Pompano Beach-Deerfield Beach (72); and Fort Myers (72).
Out of the top 16 markets, the only other state with two entries was Georgia: Savannah (72) and Atlanta-Sandy Springs-Roswell (68). At the bottom of the top 16 was Provo-Orem, with an index of 68.
Source: GlobeSt.
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