In the industrial market, net absorption is 30% below pre-pandemic levels. New construction will likely outpace tenant demand for at least another two or three quarters. Industrial rent growth has begun to decelerate from a peak rate of 12% in mid-2022 to 8.5% as of mid-2023. Still, the industrial market remains strong in nearly all US markets.
Office leasing took its biggest quarterly jump in two years this quarter, following three quarters of decline. But office leasing is still 13% below the pre-pandemic average. The average size of a new lease is 20% smaller than the pre-pandemic average. Office vacancy has reached a record 13.2% nationally. The decline in leasing volume is now driven mostly by shrinking lease sizes.
The retail market chalked up a strong performance in the first half of the year. Brick-and-mortar store debuts outpaced shutterings, by nearly 1,000. Discounters and the beauty category are winners this year, performing well and expanding. Retail sales in the first half of the year have risen 3.2%, in line with the annual growth rate between 2010 and 2019. The overall U.S. retail vacancy rate is currently 4.2%.
Multifamily property values have proven especially sensitive to interest rates, falling 14% this quarter. At the same time, multifamily rent growth retreated to just 1.1% after hitting an all-time high of 10.7%. Record completions, combined with soft demand, will likely keep downward pressure on rents for the next three to four quarters. Long term, the multifamily market will continue to be propelled by an overall housing shortage, expensive for-sale housing and favorable demographics.
Prices for all property types shrank across the country compared to the second quarter of last year as sale volume fell sharply. The multifamily and office sectors showed the biggest price declines. The rise in interest rates is the primary driver of downward price pressure. Smaller transactions (under $3 million), often executed with cash, have demonstrated a more tempered response to the rise in interest rates.
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