Company: MMI
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001578732-25-000031
Chunk: 54

Company: Marcus & Millichap, Inc.
Filing Date: 2025-05-07
Form: 10-Q
Item: Part I, Item 1
Chunk 54
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 types of commercial real estate could be negatively impacted. However, if a trade war is averted and sentiment increases, space demand could be bolstered.

All four major property types saw positive space demand in the fourth quarter of 2024 and in the year ended December 31, 2024. Nearly 660,000 apartment units were filled in 2024, the second strongest annual total in the 32 years on record. Apartment demand sustained momentum in the first quarter of 2025 with nearly 147,000 net units filled, the strongest first quarter on record. Office space demand was also positive in the first quarter of 2025, marking the fourth consecutive quarter of gains. This has helped reduce the office vacancy rate by 50 basis points from its peak of 17.2% set in the second quarter of 2024 spurring speculation that a slow recovery of the office market is occurring. Industrial space demand also remained positive, but the pace of absorption was overshadowed by new completions. Following 17 consecutive quarters of positive demand, retail space absorption fell in the first quarter of 2025, pushing the average 

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vacancy rate up by 10 basis points to 4.5%, still well below the twenty-year average of 5.6%. The retail space demand slowdown may reflect a temporary moderation of expansion plans by retailers ahead of tariff and trade war risks or it could simply reflect the limited availability of retail space.

The commercial real estate space demand outlook remains difficult to discern amid the dramatic policy shifts enacted by the new U.S. presidential administration. Increased uncertainty, falling sentiment and risks of a recession and higher inflation could slow decision making, causing commercial real estate space demand to falter. If the trade war deescalates and policy clarity emerges, commercial real estate space demand could be reinvigorated. Nonetheless, all commercial real estate property types have entered the new cycle on sound footing, suggesting a durable performance outlook.

Capital Markets

Credit and liquidity issues in the financial markets have a direct impact on the flow of capital to the commercial real estate market. Real estate purchases are often financed with debt, and as a result, credit and liquidity impact transaction activity and prices. Movements of interest rates in one direction, whether increasing or decreasing, could adversely or positively affect the operations and income potential of commercial real estate properties, as well as lender and equity underwriting for real estate investments. These changes directly influence investor demand for commercial real estate investments and what they are willing to pay. Furthermore, the use of