The New NAIOP Market Monitor Creates a Two-Dimensional Analysis, Includes Market Volatility In Rankings of Individual Real Estate Markets
July 17, 2023 – A new analysis from the NAIOP Research Foundation, the NAIOP Market Monitor, presents a two-dimensional alternative to traditional commercial real estate market rankings that provides insight into a metropolitan market’s liquidity and its relative volatility.
“The NAIOP Market Monitor also tells a broader story about transactional volume shifts and volatility. This may help investors and developers create better strategies around market entry and exit, and to more easily identify markets that match risk and return objectives or merit further examination,” according to the report.
This debut report compares the positions of large and midsized U.S. industrial and office markets at the close of the first quarter of 2023 with the pre-pandemic positions of the same markets at the end of the first quarter of 2019 and reveals insights that would not be seen through a traditional a tier or ranking approach.
For example, the report reveals large changes in capitalization rate and transaction volatility among major office markets, as well as increases and decreases in total transaction volume in both office and industrial markets that reflect their performance during the COVID-19 pandemic and the continuing importance of broader demographic trends.
Among the report’s key findings:
- Among the largest office markets, Washington, D.C., and Baltimore experienced a large increase in volatility; many tech-focused markets, such as San Jose, California; Seattle; and Austin, Texas, experienced decreases in transaction volume.
- Changes in transaction volume in many office markets also reflect demographic shifts, including the migration of households to lower-cost markets, and business growth in the Sunbelt.
- In contrast to the office markets, industrial markets were more likely to experience significant changes in transaction volume, with fewer notable changes in volatility.
- The limited supply of land in the largest industrial markets is contributing to additional development in smaller adjacent markets where land is more abundant.
The NAIOP Market Monitor analyzes transaction volume and capitalization rate data provided by CoStar. The largest 102 office and industrial markets in the U.S. are sorted into the largest 51 and next-largest 51 as measured by transaction volume in the most recent quarter. The report was authored by Maria Sicola and Megan Weiner, both of Heybrook West, and Charles Warren, WSP.
“The NAIOP Market Monitor is a breakthrough in commercial real estate analysis that takes into consideration multiple factors, allowing developers to more accurately determine the appropriateness of investing in a particular market at a particular time,” said Marc Selvitelli, president and CEO of NAIOP.