Top 10 Commercial Property Rental Markets

Published: 11-16-23    Category: Insight

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

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Much like their residential counterparts, commercial real estate markets endure the ups and downs of cycles and trends. Knowing how to utilize these trends to identify the best markets for commercial investments is key.

2023, for instance, saw markets continue to settle after rapid growth throughout 2021 and 2022. But despite these softening markets, many regions are poised for rapid growth and development.

With that in mind, we've compiled this list of the top ten markets to invest in commercial property for rent. We chose these markets based on a combination of growth, rental prices, and dominant industries.

Let's get started.

Factors to Consider When Evaluating Markets

First, though, let's consider some key features to consider when you're in the market to buy or lease commercial property.

#1 – Economic Indicators

Basic indicators can give a picture of the state of the economy and its health. Key indicators that are relevant for rental property investors include:

Indicators are useful for identifying target markets, but they shouldn't be the end of your analysis.

#2 – Market Demand

The easiest way to measure market demand for commercial property rentals is to look at median rental prices. You can also gauge demand through total sales volume.

For example, the simplest way to gauge demand for retail space for rent is to see if retail rental prices and sales volumes are increasing.

Depending on demand, it can be harder to fill vacant space. One tactic that landlords can use to counter low market demand is to offer lease concessions, like rent abatement and tenant improvement allowances.

#3 – Infrastructure & Transportation

Property needs to be accessible to its tenants and their businesses, so part of your criteria should be surrounding transportation and infrastructure, like roads or transit.

For example, a garage for rent would likely need appropriate road and truck access points, depending upon what its tenants are using it for.

#4 – Local Business Regulations

Some states and cities are more friendly to businesses that want to rent commercial property and have lower tax rates or less strict commercial real estate leasing regulations as a result. For example, Texas and Nevada don't levy corporate income taxes.

National Commercial Property Rental Markets

The general trend as it stands today across US commercial property markets is that industrial and retail leasing is doing well, with 7.4% and 4.1% year-over-year rental growth. Much of this growth is due to exploding e-commerce sales and demand.

Office space, on the other hand, still struggles to recover, with 15%+ average vacancy rates. Demand for multifamily real estate is more-or-less stable, with occupancy rates trending near long-term averages.

Now, let's take a look at some stand-out commercial real estate markets in 2023.

#1 – Nashville

Nashville boasts the best overall commercial real estate performance in the nation, with strong activity across most sectors. With incredibly strong population and job growth, Nashville has one of the nation's fastest-growing commercial real estate markets.

Multifamily construction is strong, and industrial leasing recently hit 1.6 million square feet. The opportunity and growth to be found in Nashville, as a result, make it a great place for first-time lessees and investors.

#2 – Dallas

Dallas has over 1.3 million residents and an economy heavily grounded in healthcare, technology, manufacturing, and transportation.

Office construction in Dallas is strong, and the industrial real estate market recently surpassed a total of one billion square feet.

#3 – Atlanta

Atlanta's industrial market experienced a record 12.7 million square feet of development in Q3 2023, and retail vacancies are steadily declining to sub-5% levels.

Multifamily sales in Atlanta also reached over $8 billion between 2022 and 2023, nearly double the historic averages.

#4 – Phoenix

New deliveries in Phoenix's industrial real estate market totaled over 13 million square feet in Q3 2023, with rental rates at a record high of $1.04 per square foot.

Multifamily construction also remains high in Phoenix despite falling rents. Vacancies for retail space also reached record lows of 5.3% this quarter.

#5 – Austin

A popular metropolis with extremely business-friendly policies, Austin strongly demands virtually all kinds of commercial real estate.

Austin delivered over 1.2 million square feet of industrial product in Q3 2023 and has over 40,000 multifamily units in the construction pipeline.

#6 – Seattle

Seattle is known for its aerospace and tech industries, and the state of Washington ranks well for its growth potential

Cap rates in Seattle's industrial market have risen nearly 7.2% over the past quarter, and retail vacancies still sit below 3%.

#7 – Houston

The third Texas city on the list, Houston's massive $460 billion economy is bolstered by its incredible manufacturing and industrial growth.

Houston's industrial market saw over 7.5 million square feet of leasing activity last quarter, and leasing rates have grown to $9.35 per square foot.

#8 – San Diego

San Diego's manufacturing sector has grown in recent years, seeing improvements in its aerospace, defense, medical tech, and shipbuilding industries.

Retail vacancies in San Diego reached sub-5% this quarter, and multifamily rents in San Diego are among the highest in the nation at over $3,000 per month.

#9 – Charlotte

Similar to other cities, Charlotte's industrial market has reached new heights, while its office rental market struggles.

Industrial asking rates hit $95 per square foot this quarter, and Charlotte's multifamily market exceeded over 5,000 units of absorption, placing it among the nation's top-performing multifamily markets.

#10 – Denver

Denver's market remains hot despite shifting from hot to warm this quarter.

Deliveries in Denver's industrial market remain strong, and retail sales volumes and rents jumped 30% and 1.8%, respectively, from the previous quarter.

Risks and Benefits of Investing in Each Market

Rising interest rates and increased borrowing costs still pose significant risk to today's commercial real estate investors, though most experts agree we've staved off any possibility of a near-term recession.

There's also a noticeable flight-to-quality occurring in markets across the nation, especially in offices, meaning that investors might have difficulties filling non-Class A properties. Tenants might use lease renegotiations to ask for building improvements or else leave for higher-quality properties

If you're unsure where to start, consider hiring a commercial real estate broker. A broker can guide you in your commercial property rental journey, identify suitable properties, gather necessary documents, and more.

Due Diligence Is Key

Ultimately, the best market for commercial real estate for rent depends on your specific needs. Our rankings are just a guide and are not the final word, so it's up to you to research and determine which market is best for you.


This article was created with property data in corroboration with other freely available commercial real estate reports.

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