- Seattle-Tacoma-Bellevue ranks as the top bull market in the nation due to its strong economy, low CRE distress, and robust loan performance, despite challenges at Boeing.
- Phoenix-Mesa-Scottsdale and San Jose-Sunnyvale-Santa Clara are also strong bull markets, benefiting from population growth, low delinquency rates, and thriving tech sectors.
- Memphis is the leading bear market, struggling with widespread CRE distress and economic vulnerabilities tied to its logistics and shipping sectors.
- Milwaukee-Waukesha-West Allis and Kansas City also face significant challenges, including high delinquency rates and economic risks tied to concentrated industries.
Trepp’s latest nationwide analysis identified the top bull and bear markets in commercial real estate CRE for July 2024, highlighting regions where investor sentiment is either flourishing or faltering, as reported in Globest.
By evaluating metro areas based on population, multifamily, office, retail, and industrial performance, Trepp pinpointed key markets driving positive momentum, as well as those struggling with economic challenges and rising CRE distress.
Top Bull Markets
Seattle-Tacoma-Bellevue, WA
Leading Trepp’s list of bull markets is Seattle-Tacoma-Bellevue, WA, thanks to its resilient economy and relatively low CRE distress.
Despite Boeing’s (BA) recent difficulties, the region continues to benefit from the presence of major corporations like Amazon (AMZN), Microsoft (MSFT), Starbucks (SBUX), Costco (COST), and Nordstrom (JWN).
CRE loans in the area show solid performance, with only 5.67% of outstanding loan balances originating in the past 12 months, indicating a slight pullback, and 8.50% set to mature in the next 12 months. The region boasts the highest overall average cap rate at origination and the lowest delinquency and special servicing rates, reflecting strong investor confidence.
Phoenix-Mesa-Scottsdale, AZ
Phoenix-Mesa-Scottsdale, AZ, ranks as the second top bull market, driven by a large population and a healthy CRE sector.
Recent loan originations have slowed slightly, with 7.81% of outstanding balances from the past year, and 10.42% due to mature within the next 12 months.
The area benefits from low delinquency rates and a high average debt service coverage ratio (DSCR), with particularly strong performance in retail and lodging markets.
San Jose-Sunnyvale-Santa Clara, CA
San Jose-Sunnyvale-Santa Clara, CA, commonly known as Silicon Valley, is the third bull market.
The region’s strong economy, anchored by tech giants like Apple (AAPL), Alphabet (GOOGL), and Meta (META), supports high-paying jobs and robust consumer spending. CRE in this area shows high aggregate occupancy rates, tight cap rates, and a very high DSCR.
However, there are early signs of increasing distress, with 3.91% of the outstanding loan balance originating within the last 12 months and 8.34% set to mature in the coming year.
Top Bear Markets
Memphis, TN-MS-AR
Memphis, TN-MS-AR, tops the list of bear markets, struggling with widespread CRE distress. The region’s economy is heavily reliant on cargo transportation and logistics, which are vulnerable to fluctuations in business activity and consumer demand.
This dependence makes Memphis particularly susceptible to downturns, with significant distress seen in loans like the $22.03M Lenox Park Loan, which became 30-day delinquent in July 2024.
While lending has slightly picked up, with 8.06% of current balances originating in the last 12 months, 7.39% of the balance is due to mature soon, posing further risks.
Milwaukee-Waukesha-West Allis, WI
Milwaukee-Waukesha-West Allis, WI, is the second-largest bear market, facing economic challenges tied to its reliance on white-collar jobs in finance, commodities, and manufacturing.
The area’s CRE debt market is relatively small, with only 3.83% of the current outstanding balance originating in the past 12 months.
However, 8.09% of the balance is set to mature soon, which could lead to potential deleveraging, especially if economic conditions worsen.
Kansas City, MO-KS
Kansas City, MO-KS, rounds out the top three bear markets. The region’s CRE market is small and heavily concentrated in agricultural and manufacturing sectors, leading to heightened vulnerability.
Recent issues include the $65.5M City Club Crossroads KC loan, which became 30 days delinquent in July, contributing to a rising delinquency rate.
With 6.50% of the outstanding balance originating in the last 12 months and 6.05% set to mature soon, the market is currently facing more pressure from new delinquencies than from maturing debt.
