A Snapshot of Office, Multifamily Performance

There’s been a shift between large and small property sales trends, with larger ones doing better than the smaller ones — a change from 2023, reported Green Street.

The report went into details of different sectors. The first was office, which has been in a cauldron of difficulty since the pandemic and work-from-home started to dismantle demand. Then the split between Class A on one side providing what premier companies wanted, and Classes B and C on the other, showed a lot of obsolescence.

Office did a twist on the large and small dichotomy. Smaller office properties (those between $5 million and $25 million in value) “easily outperformed” industrial spaces (those worth more than $25 million). The former saw an 11% decline in dollar volume sales year-over-year in the first half of 2024 while the latter dropped 22%. The second quarter had $3 billion in trades, the fourth-lowest quarterly results. The worst quarters were the second and third of 2020 and the first of 2021.

The five largest drops by percentage were Philadelphia, PA (-47.1%); Chicago, IL (-43.4%); Washington, DC (-37.7%); Los Angeles, CA (-36.0%); and Phoenix, AZ (-26.1%). The five largest gains by percentage were Inland Empire, CA (357.1%); San Francisco, CA (91.9%); San Diego, CA (84.0%); Las Vegas, NV (77.0%); and Boston, MA (55.7%).

Green Street said that Southern California has three of the top 10 markets, including Los Angeles (trending as the leading small office market in the country) and San Diego (the second largest volume market in the country).

Office REITs found little change in leasing volume and occupancy. Retention rates were below historical averages. Leasing volumes are expected to be flat.

In multifamily, total sales in the first half of 2024 were $10.2 billion, down 14.% year over year. The split by subcategory was 89.0% in apartments, 8.1% in senior living, and 2.9% in student housing. The second quarter saw $5.24 billion in sales, up 7% from the $4.92 billion in Q1.

The five biggest percentage declines were Northern New Jersey (-52.8%); San Diego, CA (-48.6%); Los Angeles (-45.1%); Atlanta, GA (-42.2%); and Chicago, IL (-31.9%). The five largest percentage increases were in Fort Lauderdale, FL (104.0%); Norfolk/Hampton Roads, VA (72.7%); Orange County, CA (51.7%); San Francisco, CA (47.5%); and Denver, CO (46.6%).

Greet Street revised its estimates of the supply growth that helped push up vacancy rates and limit rent growth. The current excess inventory will, they say, continue constrained fundamentals into 25. However, there will likely be “considerable relief” in 2026 and 2027.