Integra Realty Resources Unveils Mid-Year Commercial Real Estate Report

Integra Realty Resources (IRR), one of North America’s largest independent commercial real estate valuation and consulting firms, has unveiled its Mid-Year Commercial Real Estate Report. This in-depth update complements IRR's flagship Viewpoint annual report issued in January.

The mid-year release consists of 240 detailed local reports encompassing 60 U.S. markets across four property types: office, multifamily, retail, and industrial. In addition to the individual market reports, IRR has also rolled out a summary document featuring updated property summaries, market cycle charts, and comparison charts of market rents and vacancy rates for each property sector.

“Despite prevailing uncertainties and shifting trends across the commercial real estate sector, we see many reasons to remain optimistic,” said Anthony M. Graziano, CEO of Integra. “Our extensive mid-year report illustrates how real estate players continue to adapt to changing dynamics in the post-pandemic world.”

Key insights from IRR's mid-year report on retail include:

• The retail real estate sector is rebounding strongly from Covid-19, buoyed by continued discretionary consumer spending. Notably, consumer debt skyrocketed in the first half of 2023 which should be a cautionary marker as we head into continued economic uncertainty. The post-Covid consumer “balance sheet lift” has eroded, and retailers will need to monitor consumer sentiment and spending patterns. Investors will be rewarded by understanding their tenant mix, tenant market position, and local demand dynamics as consumer spending shifts into lower gear.
• The West and East regions are leading in mixed-use developments, reflecting an innovative approach to retail spaces in land-constrained markets.
• The Central and South regions, despite facing vacancies, are capitalizing on opportunities in adaptive reuse and redevelopment, highlighting a strategic focus on repurposing existing spaces.
• Changes to regional investment metrics from Q2 2022 to Q2 2023 include:

Cap Rates: Community Retail properties experienced the most pronounced changes in cap rates, with the South region leading the way, rising to 7.22%, and a notable national increase of 25 basis points to 7.15%. In contrast, Neighborhood Retail cap rates exhibited a more subdued expansion, both regionally in the East & West with an increase of 7 basis points, and nationally, increasing only 20 basis points to 7.17%.

Market Rents: Market rents varied with neighborhood retail properties in the West leading regionally with a 1.72% increase to $26.65, while nationally rents rose by 1.06% to $19.69; community retail properties saw more modest gains both regionally and nationally.

Vacancy Rates: Vacancy rates for neighborhood retail properties in the Central region rose by 28 bps to 12.57%, while community retail in the West dropped by 24 bps to 7.81%; nationally, slight variations were observed in both categories.

• Market Cycles: From Q4 2022 to Q2 2023, national retail cycles shifted with expansion declining to 27.4% of markets reporting and recovery markets comprising 37.1%; notable regional changes include a tripling of the number of markets in the East categorized as recovery, and the decline to 17.7% of the reporting markets in the South that are in expansion.

The report also contains comparable data for the Office, Industrial, and Multifamily sectors. For more, click here.