Company: MMI
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001578732-25-000015
Chunk: 81

Company: Marcus & Millichap, Inc.
Filing Date: 2025-02-27
Form: 10-K
Item: Item 7
Chunk 81
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 demand trends, together with a generally positive economic outlook and the prospect of accretive commercial real estate tax policies have the potential to drive increased investor activity, particularly if uncertainty abates and interest rates are reduced.

Commercial Real Estate Supply and Demand 

Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected by many factors beyond our control. These factors include the supply of commercial real estate, coupled with user demand for these properties, and the performance of real estate assets, when compared with other investment alternatives, such as stocks and bonds.

All four major property types saw positive space demand in the fourth quarter of 2024 and in the year ended December 31, 2024. Over 200,000 net apartment units were filled in the fourth quarter, taking the annual total apartment unit demand above 660,000, the second strongest annual total in the 32 years on record. The demand modestly outpaced the record 590,000 apartment completions delivered in 2024 to reduce vacancy by 60 basis points to 5.2%. Robust apartment demand outpaced expectations and bolstered multifamily investor confidence.

The industrial vacancy rate increased in the fourth quarter of 2024 as still-elevated construction exceeded space demand. For the year, the industrial vacancy rate rose by 130 basis points to 6.9% as tempered space needs met the still-robust construction pipeline. Industrial completions are expected to fall by 40% in 2025 to 210 million square feet, the slowest construction pace since 2014. Although many retailers increased their inventories ahead of anticipated tariffs, warehouse industrial space needs have tapered significantly over the last two years. Retail vacancy rates have remained range-bound in the mid-4% range, near a record-low. Space absorption has been tempered by limited space availability and nominal construction levels. The limited availability of retail space is placing upward pressure on lease rates, but the pace of increases is restrained by extended pre-negotiated lease renewals. Office vacancy rates decreased an additional 20 basis points in the fourth quarter to 16.7% on positive absorption of 29 million square feet. For the year, total net office absorption approached 55 million square feet, the strongest annual office space demand since 2019. Although office space demand momentum appears to have shifted, office performance remains challenged by vacancy rates that are still near a record high.

We expect the generally positive commercial real estate space demand will align with an anticipated falloff