Searching for positive news in the commercial real estate industry? Take a look at investor demand for multi-tenant commercial properties.
Northmarq reported that investors sunk $53.9 billion in multi-tenant commercial properties during the fourth quarter of last year. That’s an increase of 36.8% from the third quarter and meant that in all of 2024 multi-tenant properties saw $166.9 billion worth of sales.
That final year-end tally beat 2023’s by 2.9%.
Of course, not all commercial sectors attracted as much attention from investors. Northmarq reported that the industrial sector accounted for $22.8 billion of investment sales in the fourth quarter, representing a quarterly jump of 31%.
In what many might consider a surprise, office transactions increased by more than 60% in the fourth quarter of last year when compared to the third, reaching $19 billion. That number is lower than what the office sector had seen during its strongest quarters, but it is the strongest performance for this struggling sector since the third quarter of 2022.
The retail sector saw $12 billion in investment sales volume in the fourth quarter. That quarter was its strongest performance in more than a year, according to Northmarq.
Northmarq reported that cap rates for multi-tenant investments rose modestly at the end of 2024, increasing by four basis points to an average of 7.05%. This, though, marks the highest average cap rate in more than a decade.
Private investors were active in 2024, with Northmarq reporting that they accounted for 55% of the buyer pool for multi-tenant commercial properties last year. Private investors were particularly busy in the retail sector, accounting for 63% of the assets traded in this sector.
Institutional buyers accounted for 22% of the overall investment sales market, focusing mostly on industrial multi-tenant properties. REITs, which favored office and retail properties, accounted for 11% of multi-tenant investment sales in 2024.
Buoyed by this good news, Northmarq predicted an even stronger 2025 for the multi-tenant market. Northmarq says that investors in this space should continue to favor industrial and e-commerce-related assets.
