- The retail sector outperformed other property types, up 5% YoY in January and an annualized growth rate of 18.9%.
- Industrial posted a 3.4% annual growth, continuing a streak of consistent performance despite a flat MoM trend.
- Apartment prices slipped 1.6% YoY, while offices, particularly in central business districts, saw the steepest declines.
- Prices in non-major metro areas inched up 0.8% YoY, while major metro areas like New York and Los Angeles slipped 1.4%.
Commercial property prices inched up a modest 0.3% YoY in January, a positive start to 2025, as reported by GlobeSt.
By The Numbers
Notably, January’s reading marks the fourth consecutive monthly increase for CRE prices, which were also up 0.5% MoM. According to MSCI’s RCA Commercial Property Price Index (CPPI), this suggests an annualized 6.5% rate.
Despite the positive trend, the market continues to face challenges, including inflation, rising borrowing costs, and shifting dynamics. These factors will likely continue driving uneven price growth in the short term.
Retail Outperformance
The retail sector emerged as the strongest sector performer in January, with property prices up 5% YoY and 1.5% MoM, suggesting an attractive annualized growth rate of 18.9%.
Despite the economic challenges facing other commercial property types, retail’s outperformance underscores the sector’s resilience and ongoing recovery, fueled by renewed consumer spending and rising demand for brick-and-mortar stores.
Steady Industrial Growth
The industrial sector continued its strong showing, posting a 3.4% increase in YoY prices. January also marked the seventh consecutive month of annual growth for the industrial market.
However, the sector saw no month-over-month change, reflecting some stabilization after several years of rapid growth. While industrial properties outpaced other sectors in recent years, retail’s recent performance has slightly overshadowed industrial in terms of price appreciation.
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Apartment vs. Office
Apartment prices slipped 1.6% YoY in January, though they were up 0.7% MoM, suggesting an annualized 8.1% growth rate. This mixed trend reveals a multifamily market impacted by rising interest rates and affordability issues.
Meanwhile, office property prices continued to struggle, with central business district (CBD) office prices down 10%. Suburban offices also saw challenges, with prices down 1.5% annually, though they saw a modest 0.1% increase from the previous month.
Major vs. Non-Major Metros
Prices in the six major metros—Boston, Chicago, Los Angeles, New York, San Francisco, and Washington, DC—fell by 4.1% YoY in January. In contrast, non-major metros saw CRE prices inch up 0.8% over the same period.
Non-major metros also outperformed major metros MoM, a notable shift in demand as investors and tenants seek properties outside the most expensive cities.
Looking Ahead
The US CRE market continues to face uncertainty, with still-high inflation and rising borrowing costs weighing down the sector.
MSCI notes that these factors, coupled with trade tensions and broader economic concerns, contribute to the uneven price trends observed across different property types and markets.
Despite the challenges, some sectors, like retail and industrial, remain resilient, while others, like office properties in major urban centers, remain under pressure.
