North Bay CRE Market Update: Q3 2024 – Trends, Insights and What to Expect

Lending rates have seen only a slight decline, so it's not surprising that transaction volumes continue to dip. However, the market remains dynamic—especially in the retail sector, which is showing resilience with a 3.5% increase in prices.

Transaction volume has declined for the eighth consecutive quarter, driven by high borrowing rates and market uncertainty. As expected, prices per square foot have decreased, while capitalization rates have risen. Additionally, the inventory of properties for sale has grown.

Pricing Down, Sale Transactions Low?

• SALES VOLUME DOWN - Sales transaction volume is down 33.3% from Q2, and 52.9% off from the ten-year average.? A sign of continued market caution.
• PRICING Down – Overall average per square foot trading prices were down 1.8% over twelve months (-2.9% industrial, -4.6% office, +3.5% retail).
• CAP Rates Up - Average Capitalization Rate closed the quarter at 7.02% up from 6.0% at the beginning of 2023 reflecting increased investor caution.
• Dropping INTEREST RATES - 10YR Treasury closed the quarter at 4.16%,12-mo Inflation was last reported to be 2.5.
• Medium size FOR SALE CRE inventory is 178 buildings, 10yr average is 133 bldgs.

LEASING MARKET

North Bay Commercial Market – Q3 2024 Trending Report

Leased space absorption varied this quarter, showing a cautious approach from both tenants and investors. Vacancies increased, particularly in the industrial sector. Despite this, rental rates saw a modest 2.3% increase over the previous year. The market is experiencing a clear 'flight to quality,' with top properties in prime locations maintaining lower vacancies and securing higher rents. To attract and retain high-quality tenants, offering new incentives has become more crucial across all market segments.

Overall Rents up 2.3% year over year.

• Overall vacancy has risen to 7.5% up from 6.3% in 2022, with sector-specific vacancies at 10.5% for Office, 6.7% for Industrial, and 5.5% for Retail.
• There's been a 2.3% rise in the average asking rental rates over the past year.
• Office and Retail have shown positive absorption over the quarter, while Industrial has seen negative net absorption rates.