Market Monitor: Read Heybrook West's third published report with NAIOP

Our follow-up report to our previous two white papers, A Two-Dimensional Approach to Evaluating Commercial Real Estate Markets (August 2021) and A New Look at Market Tier and Ranking System (March 2020), has been published!

Please find our latest report published in partnership with NAIOP here: The NAIOP Market Monitor https://www.naiop.org/research-and-publications/research-reports/reports/naiop-market-monitor/

Summary:

By: Maria Sicola, Megan Weiner and Charles Warren

Release Date: July 2023

The two-dimensional grid underlying this report is an evolution from ranking markets along a single dimension, such as tiers. Both models, ranking and two-dimensional analysis, reveal how markets change over time, but the two-dimensional system provides more information by measuring changes across multiple variables.

There are distinct advantages to the two-dimensional analysis, as it provides a deeper understanding of market dynamics. Evaluating data in a tier or ranking model only considers one dimension. Even when an analyst incorporates several different variables into a ranking methodology, placing markets in an ordinal or tier ranking can obscure certain information. The NAIOP Market Monitor’s two-dimensional grid reveals changes over time in both sales volume and volatility, giving insight into risks that may not be apparent in traditional one-dimensional models.

The NAIOP Market Monitor also tells a broader story about transactional volume shifts and volatility. This may help investors and developers create better strategies around market entry and exit, and to more easily identify markets that match risk and return objectives or merit further examination.

In this first NAIOP Market Monitor report, the authors compare the positions of large and mid-sized U.S. industrial and office markets in grids at the close of the first quarter of 2023 with the pre-pandemic positions of the same markets at the end of the first quarter of 2019, and highlight some insights usually not seen using a tier or ranking approach. The NAIOP Market Monitor reveals large changes in volatility among major office markets, as well as fluctuations in transaction volume in both office and industrial markets that reflect their performance during the COVID-19 pandemic and the continuing importance of broader demographic trends.

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