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From the Editor: A New Landscape for Commercial Real Estate
Jennifer LeFurgy
This past year, we witnessed a significant shift in trends and priorities within the CRE sector. As interest in the office market declines, more investment is flowing toward data centers and innovative mixed-use developments. Simultaneously, companies are working to build more resilient supply chains in North America through nearshoring and onshoring strategies. This shift is expected to create numerous opportunities in the transportation and logistics sectors. Additionally, the rise of artificial intelligence is set to change how CRE professionals conduct their work both now and in the future.
This issue explores these trends, offering insights from NAIOP’s research directors and a case study of a former mall site that has been transformed into industrial, retail and multifamily uses.
Happy holidays and wishing you the best in the new year,
Jennifer LeFurgy, Ph.D.
Editor-in-Chief
In Brief
Notable facts and figures on the state of the commercial real estate industry, culled from media reports and other sources.
INDUSTRY OUTLOOK
$23.3 Billion
The amount that U.S. REITs raised from secondary debt and equity offerings in the third quarter of 2024, according to Nareit. Of the total, $15.4 billion came from debt, $2.8 billion came from secondary common and preferred equity offerings, and $5.1 billion was raised in one initial public offering (IPO) by Lineage, the world’s largest cold storage provider by capacity. It stands as the largest REIT IPO in history.
DATA CENTERS
40%
The portion of total capital being raised by real estate funds specifically to invest in data centers, according to an analysis by global law firm Linklaters. “Globally, there are more than 50 real estate funds currently capital raising and actively seeking exposure to data centres, with a combined target size of over $50 [billion].” More than $20 billion of that total is marked exclusively for data centers, “with the remainder being raised to invest across real estate asset classes, including data centres.”
3%
The data center vacancy rate in the Americas, as highlighted in Cushman & Wakefield’s October research report on data center markets. Over 80% of deliveries are preleased in major markets. “Demand for artificial intelligence and cloud data centers surged in the first half of 2024, in both established and emerging markets. Absorption is poised to surpass the record levels set in 2023. Power availability remains a critical concern, prompting developers to explore extensive geographic areas for substantial power options within the next two to three years.”
MULTIFAMILY
740,000
The number of annualized multifamily unit completions over the past year, according to the RealPage Analytics Blog, reporting on numbers from the U.S. Census Bureau and the Department of Housing and Urban Development. More apartments have been completed in the last year than at any point in the last 50 years, dating back to April 1974. The number of completions was 79.2% above the total for August 2023.
OFFICE
30
Million The amount of office inventory in square feet that has been planned for removal, predominantly for office-to-residential conversions, through the third quarter of 2024, per JLL’s U.S. Office Market Dynamics report. This marks the fourth consecutive year of record office inventory removal volume in late September. “With the concurrent acceleration in leasing activity and slowdown of new supply, availability levels [in the office market] have begun to decline for the first time in over five years.”
83%
The percentage of Canadian CEOs who said they envision in-office work becoming the norm again within the next three years in an annual KPMG CEO Outlook survey. In 2023, only 55% of respondents held the same opinion. In the 2024 survey, 13% of Canadian CEOs saw hybrid work becoming the norm (compared with 40% in 2023), while 4% said fully remote work would be the primary working environment (compared with 5% in 2023). Of the 75 CEOs polled, 90% said they would be likely to reward workers who returned to the office with favorable assignments, pay raises or promotions.
OPPORTUNITY ZONES
17
The number of Major League Baseball stadiums (out of 31 total, including the Athletics’ new stadium in Las Vegas) that are either located in or in very close proximity to Opportunity Zones (OZ). As noted by the website OpportunityZones.com, “This is an impressive total, considering only roughly 12 percent of the landmass of the United States lies within an OZ. Clearly, stadium districts are ripe for development opportunity and investment.”
CLIMATE RISK
290,000
The number of new properties built in high-risk flood zones across the United States from 2019 through 2023, as reported by The Wall Street Journal. That amounts to nearly 20% of the 1.6 million properties built during that time.
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