The 2024 Q2 North America Market Report from Lee & Associates highlights some key differences between the U.S. and Canada, such as a stronger multifamily market in the U.S. and more consistent demand for office space in Canada. However, there are also common themes emerging in both countries as we approach the end of 2024. Connect CRE spoke with CEO Jeffrey Rinkov, based out of Westlake Village, CA, to discuss these overarching themes that he and his team are focusing on.
Q: The industrial market in the U.S. saw a significant decrease in absorption during the first half of 2024 compared to last year’s numbers. When looking at this trend across all markets while acknowledging local variations, is this decline due to an increase in inventory or a decrease in tenant demand?
A: The contraction seen within the industrial market can be attributed to both flattening demand and an influx of new inventory being delivered into certain areas throughout both countries over time periods that vary widely depending on location-specific factors such as supply chain disruptions caused by Covid-19 pandemic impacts . While there are still pockets where demand remains strong for industrial space across North America , overall vacancy rates have continued their upward trajectory primarily due to new construction deliveries which were planned prior or during Covid-19 when severe supply chain disruption occurred . Recently however , we have seen signs indicating increased tenant interest which has led us believe corporate site selection activity will begin picking up again soon .
Q: In contrast with its southern neighbor’s struggling office sector , Canada appears relatively stable . What accounts for this stronger performance ?
A : There are several reasons why Canada’s office sector has remained steady despite challenges faced by other markets around it . Firstly , government intervention provided crucial support allowing businesses remain open through mandatory attendance policies implemented early on ; secondly financial assistance was granted enabling companies keep up lease payments retain employees thus sustaining occupier demands; thirdly cultural preferences favoring in-person work over hybrid strategies have also played a role.
Q: While demand for retail space has increased , there hasn’t been a corresponding increase in new construction . What is the reason for this and do you anticipate seeing more development soon ?
A : The consistent and impressive demand seen within the retail sector of commercial real estate can be attributed to consumers’ strong preference for in-person shopping experiences even during Covid-19 pandemic . With low vacancy rates and rising rental rates, we expect to see an uptick in new retail developments both now and into the future. This trend is further supported by high levels of business travel as well as successful performance within hospitality industry .
Q: Will apartment rent growth eventually return to pre-pandemic levels nationwide?
A : We are already seeing signs of stability with multifamily rental prices gradually increasing each quarter. As employees begin returning back into offices, urban core multifamily properties are experiencing lower vacancy rates coupled with reduced tenant incentives which may lead towards eventual rent growth similar or exceeding pre-pandemic norms .
Q: Regardless of property type or market location , what key themes are Lee & Associates emphasizing when working with clients during 2024?
A : Our brokerage professionals have identified several key themes that continue to shape our approach when working alongside commercial real estate clients across North America . These include potential interest rate reductions leading towards higher transaction volumes while narrowing buyer-seller expectations; growing demands from occupiers seeking data center assets ; heightened investor interest surrounding cold storage capacity ; continued strength within the retail sector; along with some indications suggesting increased office occupancy trends among tenants.
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