Key GDP growth contributors post positive results. Real gross domestic product increased at an annual rate of 1.6 percent during the first quarter of 2024. While this is a deceleration from the 3.4 percent rate from the final quarter of last year, the economy still grew in several areas. U.S. residents continued to spend robustly, with final sales to private domestic purchasers up 6.1 percent annualized, the best mark in a year. Residential and non-residential fixed investment also climbed, largely driven by single-family home construction and new intellectual property. A 7.2 percent surge in imports countered some of these figures, contributing to the smaller gain in the overall GDP measure.

Higher incomes benefit multifamily, retail properties. Despite slower real GDP growth, the first quarter was the best opening period for job creation, outside of the pandemic rebound, since 2012. More employment opportunities are supporting greater real disposable income, up by an annualized 1.1 percent in the first quarter, enabling household formation and retail spending. Apartment net absorption achieved a nine-quarter high in the first quarter, a feat that would have lowered vacancy had a record-high 135,700 new units not opened at the same time. While deliveries will remain elevated for the near term, inhibiting rent growth, underlying demand is expected to improve further. Supply pressure, meanwhile, is largely absent from the retail sector, where vacancy has held at a multi-decade low of 4.5 percent for nine straight months.

Entrepreneurial efforts speak to future office space needs. The creation of new intellectual property and businesses bodes well for the challenged office sector. A record 5.5 million new business applications were filed last year. While not all of these endeavors will pan out, others will find success, likely leading to future office leasing. This demand will help offset remote work-related attrition. Pre-pandemic leases are still working their way through the system, contributing to choppy office performance. Operations continue to be the most challenged in downtown areas, with newer, smaller suburban properties tending to draw the most demand at present.

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Sources: Marcus & Millichap Research Services; Bureau of Economic Analysis; CoStar Group, Inc.; CME Group; RealPage, Inc.