Branson, Missouri commercial real estate continues to show remarkable resilience despite recent headwinds.
Occupancy rates remain high compared to other cities, partly due to the smaller impact of the work-from-home trend. The office sector also recorded a slight positive net absorption in 2023, despite limited inventory.
This contrasts sharply with the national picture, where net absorption of office space has turned negative in recent months as more people work from home and interest rates remain high, causing office leasing to fall in many markets.
Net absorption is an important determining factor for investors, developers, brokers, and prospective tenants. It provides a snapshot of market trends including rental demand, opportunities, and risks. A positive net absorption means demand is strong and growing, while a negative one indicates a contracting market. In addition to general economic conditions, changes in supply and lease renewal rates can affect net absorption.
Here we outline what net absorption means and how it impacts your CRE investment decisions.
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What does net absorption mean? How is net absorption calculated? Overall CRE Trends Branson CRE Outlook Resources for CRE in Branson, Missouri
What does net absorption mean?
Net absorption measures the change in rented space over a particular period of time.
This shows trends in commercial real estate supply and demand and can be calculated for various geographic areas, such as the city of Branson, the state of Missouri, or the entire U.S. It is also useful to look at the net absorption of individual CRE sectors, such as retail and office space.
While gross absorption indicates the total amount of space occupied within a market, net absorption subtracts the amount of unoccupied space, which gives decision makers a more accurate picture of the market situation.
Positive net absorption means that more space has been rented or sold than was vacant or supplied in a given period. This indicates healthy demand and a decreasing supply of available floor space. It also suggests that rents are likely to rise. When net absorption becomes negative, it is a sign of worsening economic conditions. It means that there is more space available than tenants or buyers are demanding. When net absorption decreases, rents are likely to fall.
How is net absorption calculated?
To determine net absorption, you need to know two things:
The total amount of commercial space that has been rented or sold within a period of interest, such as a month or a year. The amount of space that has become vacant within the same period. Vacancies can occur because a previous tenant has vacated a particular space or because of new construction.
For example, consider an office building that has undergone the following changes over the course of a year: Tenants A and B have both decided to relocate from a smaller space to a larger one as their businesses grow.
Tenant Year 1 Year 2 A 1000 sq ft 2000 sq ft B 1500 sq ft 2500 sq ft C 2000 sq ft 2000 sq ft Total 4500 sq ft 6500 sq ft
To calculate net absorption, first determine the total new space being leased.
[2000 square feet rented by Tenant A] + [2500 square feet rented by Tenant B] = 4500
Then add up the free space.
[1000 square feet vacated by Tenant A] + [1500 square feet vacated by Tenant B] = 2500
Finally, subtract the vacant space from the leased space.
Net absorption = [4500 square feet rented] – [2500 square feet vacated] = 2000 sq. ft.
Overall CRE Trends
Current economic trends suggest that the office sector will remain weak while industrial space rentals are rising significantly. Net absorption of office space has turned negative in recent months, leading to increased vacancies in various commercial buildings in the near future.
Lawrence Yun, chief economist for the National Association of Realtors, said high interest rates are a key factor hurting the market. Rising rates are putting a strain on borrowing activity and making refinancing costs more expensive. Prices for some commercial properties are falling as buyers are reluctant to take out new loans.
Yoon expects CRE to recover overall, but expects challenges to remain in the office sector.
Branson CRE Outlook
While not entirely isolated from national trends, the Branson market, known for its diverse commercial real estate offerings, has many advantages over other areas.
Strong demand, high construction costs, and a tight labor market have kept all office categories at or near full capacity. For example, Class A buildings achieved 95% occupancy in 2023. Class B and Class C recorded 92% and 99%, respectively, demonstrating the resilience of commercial buildings in the region.
Looking at all CRE categories, the Branson market is expected to perform well in 2023 due to a robust listing of commercial real estate properties. Factors driving growth include strong retail sales and low vacancy rates. Citywide occupancy is projected to be 95% in 2024, with net absorption of 43,656 square feet.
Branson, Missouri CRE Resources
At Commercial One Brokers, our expertise is your greatest asset when it comes to Branson commercial real estate.
Thanks to decades of experience, we have an in-depth knowledge of the Branson area that no other CRE firm can match. Our comprehensive database contains decades of historical data on commercial buildings and properties. We have helped clients in a variety of industries buy, lease, or invest in real estate in the lucrative Branson Tri-Lakes community.
If you are looking to buy, lease or invest in commercial real estate, contact our experts to find the best CRE opportunities in the Branson area. Call us at 417-334-3149 or contact us online to browse our extensive commercial real estate listings and find your ideal property.