The National Association of Realtors has released a new index that aims to be a crystal ball for commercial real estate investors. The index uses factors in local economies to indicate future demand, providing valuable insights for investors looking to make informed decisions.

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Strongest Metropolitan Markets

The index looks at more than 300 metropolitan markets, with separate measures for the office, industrial, retail, and multifamily sectors. The strongest metropolitan market in the index is St. George, Utah, with the strongest office employment growth in the nation. According to Nadia Evangelou, principal economist and director of real estate research at NAR, St. George has very strong population growth and in-migration, as well as above-average industrial demand.

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In contrast, formerly super-hot markets like Austin, Miami, and Naples, Florida, have all declined markedly since 2022. Raleigh, North Carolina, is the only major U.S. market that is stronger today than it was then, according to the index.

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State Rankings

South Carolina ranks highest among all U.S. states in future potential demand for commercial real estate. The index also breaks down where each of the four sectors is seeing the strongest demand, with Salem, Oregon, and Fairbanks, Alaska, ranked highest for industrial.

According to Evangelou, when we take a look at New York, San Francisco, and the big coastal markets, we see that the large markets are still generally weaker than the fast-growing Sunbelt and smaller markets in this index.

Investment Opportunities

While other indices focus on the largest metropolitan markets, Evangelou suggests that small and mid-sized markets could provide some of the best opportunities for investors. She cites Fayetteville, Arkansas; Huntsville, Alabama; and Spartanburg, South Carolina as examples of markets with broad-based growth and strong multifamily demand.

The index also highlights the importance of considering factors like population growth, in-migration, and industrial demand when evaluating commercial real estate markets.