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Just Released: IRR's Mid-Year 2023 Viewpoint Local Market Reports Aug 22, 2023

Integra Realty Resources Unveils In-Depth Commercial Real Estate Mid-Year Report, Unpacking Key Market Trends
National Summary and 240 Local Reports Provide Deep Dive into Commercial Real Estate Values and Trends Across Office, Industrial, Retail, and Multifamily Sectors

JUST RELEASED: LOCAL MARKET REPORTS


DENVER, CO — (August 22, 2023) Integra Realty Resources (IRR), one of North America’s largest independent commercial real estate valuation and consulting firms, has unveiled its highly anticipated Mid-Year Commercial Real Estate Report. This in-depth update complements IRR's flagship Viewpoint annual report issued in January.

The mid-year release includes 240 detailed local reports covering 60 U.S. markets across four property types: office, multifamily, retail, and industrial. In addition to the individual market reports, IRR has also rolled out a summary document featuring updated property summaries, market cycle charts, and comparison charts of market rents and vacancy rates for each property sector.

“Despite prevailing uncertainties and shifting trends across the commercial real estate sector, we see many reasons to remain optimistic,” said Anthony M. Graziano, MAI, CRE, CEO of Integra Realty Resources. “Our extensive mid-year report illustrates how real estate players continue to adapt to changing dynamics in the post-pandemic world. From resilience in the face of rising vacancies and operating costs, to cap stack resets for debt and equity, our latest report provides crucial insights into the factors molding our outlook on the ever-changing commercial real estate markets.”

The reports are available for complimentary download to registered users. The summary report can be accessed at www.irr.com/research. Local market reports can be found on each local office's landing page in the research section, such as www.irr.com/Philadelphia.

Key insights from IRR's mid-year report include:

Office:

  • The persistence of remote and hybrid work models has led to increasing office vacancies, with regions like Cincinnati and Charleston standing resilient.
  • Tech and biotech sectors are behind stability in specific areas, while broader economic challenges, including inflation, cloud the outlook.
  • The ability to innovate and adapt spaces to integrate work-from-home (WFH) trends is key to success in the current office market.
  • Changes to regional investment metrics from Q2 ’22 to Q2 ’23:
    • Cap Rates: CBD Class B properties in the South saw the most significant cap rate increase to 8.08% (+71 bps). Nationally, CBD class B properties also led with a cap rate increase to 8.08%, while suburban Class B properties had the smallest increase to 8.19% (+43 bps).
    • Market Rents: Class A properties in the South experienced the top regional market rent increase to $28.11 psf, while nationally, class A rents rose to $32.55 psf.
    • Vacancy Rates: Class A properties in the West saw the highest regional vacancy rate jump to 18.42% (+160 bps), while nationally, class A rates had the highest increase to 18.59% (+104 bps).
  • Market Cycles: Since Q4'22, national office markets shifted notably towards the recession phase, with the expansion phase vanishing in the West by Q2'23.

Multifamily:

  • The multi-family safe-harbor for institutional investors had a very slow start in 2023, with investment volumes off 50%+ in most markets, planned projects stalling or cancelling, an investor market slammed with a bid-ask pricing gap for the first time in over a decade, and real operating challenges managing increased expenses and slowing rent growth.
  • The national multifamily market shows a mix of growth in key cities and rising vacancies due to varied regional dynamics.
  • Eastern and Southern regions display contrasting performances with robust growth in Northern New Jersey, Boston, and Florida, while areas like Birmingham and Raleigh experience a slowdown.
  • Despite challenges in the West and Central regions, strong demand persists, highlighted by a boom in Louisville and steady demand against regulatory constraints in the West.
  • Changes to regional investment metrics from Q2 ’22 to Q2 ’23:
    • Cap Rates: Urban properties in the South led with the highest cap rate increase nationally +54 bps to 5.10%, while suburban properties in the West saw the least cap rate expansion, +32 bps to 4.82%.
    • Market Rents: Class A properties saw the highest regional market rent increase in the Central region at 5.64% and led nationally with a 4.45% rise, while class B properties experienced more modest growth, with the lowest regional increase in the South at 1.97% and a national increase of 3.08%
    • Vacancy Rates: Class B properties in the East exhibited the most significant vacancy rate fluctuations, with a national increase topping out at 107 bps to 4.29%.
  • Market Cycles: From Q4'22 to Q2'23, the national multifamily market, including the East, South, and West regions, witnessed a marked transition from expansion (72.6% to 38.7%) to hypersupply (12.9% to 48.4%) since Q4'22 indicating a probable cool-down on pricing and velocity in the coming 6-12 months.

Retail:

  • The retail real estate sector is rebounding strongly from COVID-19, buoyed by continued discretionary consumer spending. Notably, consumer debt sky-rocketed in the first half of 2023 which should be a cautionary marker as we head into continued economic uncertainty. The consumer “balance sheet lift” post-covid has eroded, and retailers will need to monitor consumer sentiment and spending patterns. Investors will be rewarded by understanding their tenant mix, tenant market position, and local demand dynamics as consumer spending shifts into lower gear.
  • The West and East regions are leading in mixed-use developments, reflecting an innovative approach to retail spaces in land constrained markets.
  • The Central and South regions, despite facing vacancies, are capitalizing on opportunities in adaptive reuse and redevelopment, highlighting a strategic focus on repurposing existing spaces.
  • Changes to regional investment metrics from Q2 ’22 to Q2 ’23:
    • Cap Rates: Community Retail properties experienced the most pronounced changes in cap rates, with the South region leading the way, rising to 7.22%, and a notable national increase of 25 basis points to 7.15%. In contrast, Neighborhood Retail cap rates exhibited a more subdued expansion, both regionally in the East & West with an increase of 7 basis points, and nationally, increasing only 20 basis points to 7.17%.
    • Market Rents: Market rents varied with neighborhood retail properties in the West leading regionally with a 1.72% increase to $26.65 psf, while nationally rents rose by 1.06% to $19.69 psf; community retail properties saw more modest gains both regionally and nationally.
    • Vacancy Rates: Vacancy rates for neighborhood retail properties in the Central region rose by 28 bps to 12.57%, while community retail in the West dropped by 24 bps to 7.81%; nationally, slight variations were observed in both categories.
  • Market Cycles: From Q4'22 to Q2'23, national retail cycles shifted with expansion declining to 27.4% of markets reporting and recovery markets comprising 37.1%; notable regional changes include a tripling of the number of markets in the East categorized as recovery, and the decline to 17.7% of the reporting markets in the South that are in expansion.

Industrial:

  • The industrial real estate sector nationally continues to thrive evidenced by increased demand for storage, distribution, and logistics facilities, with regions like the Central and South particularly benefiting from retail and infrastructure growth.
  • The Eastern and Western markets exhibit steady and varied growth respectively, influenced by economic factors and city-specific expansions, such as in Denver and Seattle.
  • Despite economic challenges, the industrial sector's outlook remains positive, supported by persistent demand dynamics including on-shoring trends, changes to logistics capacity and supply dynamics including lack of industrial land and aging industrial inventory in many markets. These positive fundamentals aside, industrial construction appears to be slowing, particularly on speculative development due to increasing capital market and land costs.
  • Changes to regional investment metrics from Q2 ’22 to Q2 ’23:
    • Cap Rates: Between Q2’22 & Q2’23, industrial cap rates varied: flex industrial properties in the East had the highest regional increase (+77 bps to 6.83%), whereas nationally, the increase ranged between +36 bps to 6.75% for flex industrial to +39 bps for general industrial properties.
    • Market Rents: Wide variations seen, with flex industrial in the East surging by +19.64% to $12.53 psf, while nationally, increases spanned from +13.67% for flex industrial to +16.46% for general Industrial properties.
    • Vacancy Rates: Rates varied, with the Central region seeing the highest increase (+40 bps to 5.66%), while nationally, rates generally decreased, with flex industrial in the East dropping notably by -217 bps to 6.83%.
  • Market Cycles: From Q4'22 to Q2'23, there was a significant shift in the Industrial market: 64.5% of national industrial markets tracked by Integra moved from expansion to hypersupply, with regional trends echoing this transition. These shifts in sentiment indicate early signs of value normalization by the market.

IRR's mid-year report serves as a launching point for stakeholders seeking to inform their decision-making processes and strategic efforts on a macro and regional market basis. To download IRR’s mid-year commercial real estate reports, visit www.IRR.com/research.

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Each IRR office is led by an MAI-designated Senior Managing Director, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets.
Integra Offices Map Denver, CO Denver, CO 575 Union Blvd.
Suite 209
Lakewood, CO 80228
Phone: 720-833-5930
Fax: 303-951-1924
Boston, MA Boston, MA
Boston, MA 02210
Phone: 212-575-2935
Fax: 646-424-1869
Seattle, WA Seattle, WA 600 University Street
Suite 310
Seattle, WA 98101
Phone: 206-436-1179
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Portland, OR Portland, OR
Portland, OR 97205
Phone: 212-575-2935
Fax: 646-424-1869
Boise, ID Boise, ID 1031 E. Park Boulevard
Boise, ID 83712
Phone: 208-342-2500
Fax: 208-342-2220
Salt Lake City, UT Salt Lake City, UT 5107 South 900 East
Suite 200
Salt Lake City, UT 84117
Phone: 801-263-9700
Fax: 801-263-9709
Las Vegas, NV Las Vegas, NV
Las Vegas, NV 89147
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Fax: 646-424-1869
Phoenix, AZ Phoenix, AZ 2999 N. 44th Street
Suite 512
Phoenix, AZ 85018
Phone: 602-266-5599
Fax: 602-266-1515
Sacramento, CA Sacramento, CA 590 Menlo Drive
Suite 1
Rocklin, CA 95765
Phone: 916-435-3883
Fax: 916-435-4774
San Francisco, CA San Francisco, CA 555 Meridian Avenue
Suite C
San Jose, CA 95126
Phone: 408-299-0444
Fax: 408-299-0449
Los Angeles, CA Los Angeles, CA 12100 Wilshire Blvd
Suite 800
Los Angeles, CA 90025
Phone: 213-984-4425
Fax: 916-435-4774
Orange County, CA Orange County, CA 4695 MacArthur Court
Suite 11
Newport Beach, CA 92660
Phone: 949-459-3717
Fax: 916-435-4774
San Diego, CA San Diego, CA 527 Encinitas Blvd.
Suite 204
Encinitas, CA 92024
Phone: 858-259-4900
Fax: 858-259-4910
Miami, FL Miami, FL 9155 S. Dadeland Boulevard
Suite 1208
Miami, FL 33156
Phone: 305-670-0001
Fax: 305-670-2276
Naples, FL Naples, FL 2770 Horseshoe Drive S
Suite 3
Naples, FL 34104
Phone: 239-643-6888
Fax: 239-643-6871
Tampa, FL Tampa, FL 550 North Reo Street
Suite 220
Tampa, FL 33609
Phone: 813-287-1000
Fax: 813-281-0681
Orlando, FL Orlando, FL 326 North Magnolia Avenue
Orlando, FL 32801-2431
Phone: 407-843-3377
Fax: 407-841-3823
Jacksonville, FL Jacksonville, FL
Jacksonville, FL 32217
Phone: 212-575-2935
Fax: 646-424-1869
Charleston, SC Charleston, SC 11-C Isabella Street
Charleston, SC 29403
Phone: 843-718-2125
Fax: 843-718-2058
Atlanta, GA Atlanta, GA 5085 Peachtree Road
Atlanta, GA 30341
Phone: 404-924-6247
Fax: 404-418-4357
Birmingham, AL Birmingham, AL 880 Montclair Road
Suite 275
Birmingham, AL 35213
Phone: 205-949-5995
Fax: 205-271-2389
Jackson, MS Jackson, MS 617 Renaissance Way
Suite 100
Ridgeland, MS 39157
Phone: 901-356-4934
Fax: 646-424-1869
Dallas, TX Dallas, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-881-7191
Fax: 972-733-1403
Fort Worth, TX Fort Worth, TX 7080 Camp Bowie Boulevard
Fort Worth, TX 76116
Phone: 817-763-8000
Austin, TX Austin, TX 100 Congress Avenue
Suite 2000
Austin, TX 78701
Phone: 512-924-1345
Memphis, TN Memphis, TN
Memphis, TN 38120
Phone: 901-356-4934
Fax: 646-424-1869
Oklahoma City, OK Oklahoma City, OK 13913 Technology Drive
Suite A1
Oklahoma City, OK 73134
Phone: 405-422-0718
Kansas City, MO Kansas City, MO 104 West 9th Street
Suite 400B
Kansas City, MO 64105
Phone: 816-652-0222
Fax: 636-530-0046
Providence, RI Providence, RI 2 Charles Street
Suite B1
Providence, RI 02904
Phone: 401-273-7710
Fax: 401-273-7410
Syracuse, NY Syracuse, NY 812 State Fair Blvd.
Suite 1
Syracuse, NY 13209
Phone: 315-422-5577
Fax: 315-422-5295
Hartford, CT Hartford, CT 386 Main Street
Middletown, CT 06457
Phone: 860-291-8997
Fax: 401-273-7410
New York, NY New York, NY
New York, NY 10036
Phone: 212-575-2935
Fax: 646-424-1869
Northern New Jersey Northern New Jersey 25A Vreeland Road
Suite 100
Florham Park, NJ 07932
Phone: 973-422-9800
Fax: 973-422-9797
Coastal New Jersey Coastal New Jersey 1415 Hooper Ave.
Suite 306
Toms River, NJ 08753
Phone: 732-244-7000
Fax: 732-505-9498
Philadelphia, PA Philadelphia, PA 1515 Market Street
Suite 800
Philadelphia, PA 19102
Phone: 610-238-0238
Wilmington, DE Wilmington, DE IRR-Corporate
Wilmington, DE 19805
Phone: 212-575-2935
Fax: 646-424-1869
Baltimore, MD Baltimore, MD
Washington, DC 20003
Phone: 212-575-2935
Fax: 646-424-1869
Washington, DC Washington, DC
Washington, DC 20003
Phone: 212-575-2935
Fax: 646-424-1869
Pittsburgh, PA Pittsburgh, PA 3535 Boulevard of the Allies
Pittsburgh, PA 15213
Phone: 412-683-2211
Fax: 412-683-2220
Cleveland, OH Cleveland, OH 22730 Fairview Center Drive
Suite 210
Fairview Park, OH 44126
Phone: 330-659-3640
Fax: 330-659-3640
Columbus, OH Columbus, OH 6233 Riverside Drive
Suite 2N
Dublin, OH 43017
Phone: 614-764-8040
Fax: 614-764-8050
Saint Louis, MO Saint Louis, MO 215 Chesterfield Business Parkway
Suite B
Chesterfield, MO 63005
Phone: 636-898-6533
Fax: 636-530-0046
Chicago, IL Chicago, IL 1 N Franklin St
Suite 3340
Chicago, IL 60606
Phone: 312-565-0977
Fax: 312-565-3436
Minneapolis, MN Minneapolis, MN 7301 Ohms Lane
Suite 190
Minneapolis, MN 55439
Phone: 612-339-7700
Fax: 612-339-7937
Nashville, TN Nashville, TN 1894 General George Patton Drive
Suite 300
Franklin, TN 37067
Phone: 615-628-8275
Fax: 615-628-8286
Richmond, VA Richmond, VA 1805 Chantilly Street
Richmond, VA 23230
Phone: 804-346-2600
Fax: 804-747-9140
Greensboro, NC Greensboro, NC 5411-A Friendly Avenue
Greensboro, NC 27410
Phone: 336-676-6033
Fax: 336-676-6025
Raleigh, NC Raleigh, NC 8382 Six Forks Road
Suite 200
Raleigh, NC 27615
Phone: 919-847-1717
Fax: 919-847-1714
Charlotte, NC Charlotte, NC 214 W. Tremont Ave.
Suite 200
Charlotte, NC 28203
Phone: 704-376-0295
Fax: 704-342-3704
Columbia, SC Columbia, SC 1623 Lake Murray Blvd.
Columbia, SC 29212
Phone: 803-772-8282
Fax: 803-772-0087
Cincinnati/Dayton, OH Cincinnati/Dayton, OH 8241 Cornell Road
Suite 210
Cincinnati, OH 45249
Phone: 513-561-2305
Fax: 513-561-2881
Detroit, MI Detroit, MI 400 W. Maple Road
Suite 100
Birmingham, MI 48009
Phone: 248-540-0040
Fax: 248-540-8239
Indianapolis, IN Indianapolis, IN 4981 North Franklin Road
Indianapolis, IN 46226
Phone: 317-546-4720
Fax: 317-546-1407
Louisville, KY Louisville, KY 13000 Equity Place
Suite 105
Louisville, KY 40223-3976
Phone: 502-452-1543
Fax: 502-451-3657
Houston, TX Houston, TX 9225 Katy Freeway
Suite 206
Houston, TX 77024
Phone: 713-973-0212
Fax: 713-973-2028
San Antonio, TX San Antonio, TX 909 NE Loop 410
Suite 632
San Antonio, TX 78216
Phone: 210-446-4444
Caribbean | Puerto Rico Caribbean | Puerto Rico Vig Tower 1225 Ave Ponce De Leon
Suite MZ-4
San Juan, PR 00907-3907
Phone: 844-952-7304
New Orleans, LA New Orleans, LA
New Orleans, LA 70130
Phone: 212-575-2935
Fax: 646-424-1869
Little Rock, AR Little Rock, AR
Little Rock, AR 72223
Phone: 212-575-2935
Fax: 646-424-1869
Grand Rapids, MI Grand Rapids, MI 1009 44th Street, SW
Suite 107
Grand Rapids, MI 49509
Phone: 616-261-5000
Fax: 616-261-5045
Lubbock, TX Lubbock, TX 6309 Indiana Avenue
Suite A
Lubbock, TX 79413
Phone: 806-368-8063
Northwest Arkansas Northwest Arkansas
Fayetteville, AR 72701
Phone: 212-575-2935
Fax: 646-424-1869