CoStar Earnings Call Insights into the Commercial Real Estate Market
CoStar Group, Inc. reported their first quarter 2024 earnings last week, and the results provide valuable insights into the current state and outlook of the commercial real estate market.
For those unfamiliar, CoStar is a leading provider of commercial real estate information, analytics, and online marketplaces. Commercial real estate investors rely on CoStar's extensive database and powerful tools to research properties, analyze markets, and uncover promising investment opportunities.
One of the key advantages of CoStar's platform is that it provides real-time data on commercial real estate activity. This data allows investors to quickly identify trends and make informed decisions based on the most current information available. Let's take a closer look at what CoStar's Q1 earning comments reveal about a few sectors of the commercial real estate market:
Office Sector
Office sector vacancies now stood at 13.8% and have risen 19 consecutive quarters. Office attendance has shown a positive trend of 2% to 3% over the past year, but that is currently counterbalanced by declining overall office using job growth. But the true silver lining is construction levels with the current supply pipeline at the lowest level it's been in 10 years and construction starts this quarter, the lowest ever. This will likely translate into a shortage of premium office space and associated price premiums in the coming years.
Industrial Sector
The industrial sector saw a 90% drop in demand in the first quarter compared to the average of the past 3 years. Deliveries in the quarter pushed vacancies up 50 basis points to 6.2%, the highest level since 2015.
Retail Sector
Retail vacancies remained largely unchanged in the first quarter, near the all-time low of 4%.
These insights paint a nuanced picture of the commercial real estate landscape.
While the office and industrial sectors face some headwinds, the retail sector remains robust. The value of real-time, comprehensive market data cannot be overstated in today's fast-paced investment environment. Both public and private investors can leverage this data, at Armada we are working on integrating private market data feeds into our systematic REIT strategies.