Industrial Leads Multitenant Investment Sales

Investment sales activity in the multitenant market surged to $53.9 billion in the fourth quarter, marking a 36.8% increase from the previous quarter. On a year-over-year basis, multitenant sales volume rose by 18.8%, according to a report by Northmarq.

The total annual sales volume for the multitenant market reached $166.9 billion, edging out the 2023 full-year volume by 2.9%. However, all sectors still fall behind the robust performance seen in 2021 and 2022, Northmarq noted.

The industrial sector led the way in investment sales, contributing $22.8 billion in the fourth quarter, a 31% increase from the prior quarter. Office transactions saw $19 billion in activity, a 60% jump, marking the sector’s best performance since Q3 2022. Retail activity reached $12 billion, its strongest performance in over a year, according to Northmarq.

For the full year, the industrial sector remained the largest contributor, capturing $70 billion in total sales, driven by demand for modern facilities and logistics hubs. The office sector outperformed expectations with $53.7 billion in sales, fueled by investor interest in medical office properties and large portfolios. Retail sales totaled $43.1 billion, slightly lower than 2023 levels, but the sector benefited from growing interest in open-air shopping centers and service-oriented retail.

Cap rates for multitenant investments saw a modest increase, rising four basis points to an average of 7.05%, the highest in over a decade. This marked a 35 basis point rise year-over-year. Office cap rates were at 7.47%, and retail cap rates stood at 7.2%, both higher than the previous quarter. Industrial cap rates were 6.17%, slightly lower than the prior quarter. The overall average cap rate vs. the 10-year Treasury spread ended the year at 250 basis points.

Private investors made up 55% of the buyer pool, with a particular focus on retail. Private investors acquired 63% of assets in the retail sector. Institutional buyers accounted for 22% of the overall market, with a notable focus on industrial properties. REITs captured 11% of the market, with a preference for retail and office acquisitions. International buyers contributed a small portion of transactions compared to historical trends.

Looking ahead to 2025, Northmarq remains optimistic about the multitenant market. Investors are expected to continue favoring industrial and e-commerce assets, while recovering office markets and evolving retail formats could attract opportunistic investors.

Source: GlobeSt.