Commercial real estate (CRE) market analysis reports are an important tool for CRE managers, investors, and decision-makers. By providing detailed insights into the real estate market, these reports guide leasing, acquisitions, and overall portfolio strategy.
This article dives into the key elements of these reports, their value to CRE , managers, and how to leverage them to make better decisions.
What CRE can learn from a real estate market analysis report
Virtually all real estate service firms offer some type of real estate market analysis. These reports are typically offered at no cost and some are quite good. Some larger firms such as CBRE, Jones Lang La Salle (JLL), and Cushman and Wakefield, offer global reports with focus on all the major market cities. Typically reports covering market analysis of real estate are issued quarterly with annual forecasts and summaries.
The reports are based primarily on brokerage activity, and most are quite detailed and accurate.
What real estate market analysis reports cover
Generally the reports cover the following categories:
- Gross and net rental rates (in $ per square foot) by property type, including office, industrial, retail, apartments, land valuation.
- Key statistics include absorption rates, vacancies, implicit interest rates, and major transactions including major leases, subleases and sales.
- Markets are organized by major metropolitan areas (both suburban, and central business district). Markets are further divided by property quality: A, B, C. Many of the reports cover international markets including Canada, UK, Continental Europe, Asia, Australia, and Middle East.
- Most reports provide forecasts of rental rate trends, interest rate trends, and outlook on availabilities, and shortages.
- Key statistics include vacancy rates, absorption (rate at which space is absorbed), space growth or reduction, interest rates, and major transactions.
- The reports usually provide commentary on market conditions, and key factors influencing market dynamics such as employment trends, new construction, regulatory changes, and changes in key factors such as zoning changes, etc.
The value of a focused real estate market analysis report
CRE managers can order special market reports that focus on specific markets and sub-markets. Ordinarily, real estate service firms will provide market analysis as part of a brokerage assignment. Sometimes it’s wise to have more than one report to validate projections and trends.
The Power of Analyzing Historical Trends in CRE Market Analysis
Analyzing historical trends is essential for providing context to current market conditions and predicting future shifts. By reviewing data on vacancy rates, rental growth, and absorption rates over several years, CRE managers can identify patterns that inform their leasing and investment strategies.
For instance, historical data may reveal seasonal trends in leasing activity, helping companies time their lease negotiations for the best terms.
Historical analysis is also important for understanding how external factors, like economic downturns or pandemics, impact commercial real estate. During the COVID-19 pandemic, for example, companies that examined historical responses to previous crises were in a better position to pivot their portfolios toward emerging trends like flexible workspaces and suburban real estate.
Leveraging historical trends allows CRE managers to make data-driven decisions rather than reactive ones, which protects their portfolios against market volatility.
Real estate market analysis: the latest trends
In reviewing the latest reports, here are some key findings:
- The Tech industry is the key driver in office markets nationwide, particularly in West Coast markets.
- The trend of growth in urban markets is beginning to subside with a resurgence in suburban markets.
- Growth in shared offices continues to trend upward, with growth in most urban and suburban markets.
- In general, the real estate markets worldwide are in good shape with no contraction anticipated over the next three years. Some analysts raise concerns with a downturn possible after three years, but there is no consensus on this possibility.
Role of Lease Accounting Software in Market Analysis
Real estate lease accounting software can be a game-changer in tracking and responding to market trends. Tools like Visual Lease centralize lease data and allow CRE managers to easily analyze financial obligations, lease terms, and performance metrics across their entire portfolio. This integration of lease data with market insights enhances strategic decision-making.
For example, lease accounting software can automate the calculation of occupancy costs, which helps CRE managers compare their current portfolio to market benchmarks. Features like customizable dashboards, automated alerts for lease renewals, and ad-hoc reporting helps decision-making and allows quick responses to market changes.
Advanced analytics tools within the software can also identify opportunities to optimize expenses, like renegotiating leases in oversaturated markets or leveraging favorable market conditions to expand. By incorporating lease accounting software into their strategy, CRE managers can ensure their decisions are data-driven and aligned with the current market.
CRE managers need to stay abreast of real estate market trends and adjust leasing and portfolio strategy as appropriate. We recommend taking a five year view of the markets, and update your company’s real estate strategy based on a five year rolling forecast. This means becoming knowledgeable about the insights provided by real estate market analysis reports, and following the trends on a quarterly basis.
By staying updated on trends and leveraging insights from reports, CRE managers can optimize leasing strategies, reduce risks, and seize opportunities in a competitive market. Integrating tools like lease accounting software ensures accurate tracking and simple management of lease data, enhancing the ability to respond to market shifts with confidence. Trust a superior lease accounting software like Visual Lease to aid in your market analysis process.
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