Analysis shows that the commercial real estate market is performing in three wildly different parts, but vacancy rates won’t peak until next year.

Commercial real estate giant Cushman & Wakefield Inc. have released their midyear macro-outlook report for the United States and its impact on commercial real estate for 2024, which shows that while the market is resilient and steady due to robust economic drivers, public spending patterns have sectioned the commercial real estate market into three distinct pieces.

First among the market are Class A office buildings. The buildings, called the “most prestigious buildings competing for premier office users with rents above average for the area” by Building Owners and Managers Association International, due to their high quality, amenities and surroundings, have 30% at full occupancy, and another 20% with vacancy rates of less than 15%. Strong numbers currently, but significant decreases in office spaces are expected over the next half decade as companies continue adjusting towards hybrid work.

Next up is the industrial sector, where pandemic buildouts of industrial facilities are projected to lead to rising vacancy rates culminating in 6.2% in 2025. Rent growth, while strong, is expected to moderate over the same time period.

And finally, retail, where vacancy rates for open-air market centers rests at 5.4%, an all-time low. Demand for space from a diverse group of tenants does, however, have the retail sector looking at potential growth opportunities, with 850 more store openings than closings planned. High-quality locations will remain scarce, however, as less than 12 million square feet of space are under construction, leaving owners with leverage to increase rents. New supply is not expected until 2027.