What is a Submarket in Real Estate?

In real estate, a submarket is a smaller, distinct segment within a larger market area (often within a metropolitan region). It is used to group properties and track performance at a more granular level than the overall market.

Key Features of a Submarket

• Geography: Usually defined by neighborhoods, ZIP codes, or boundaries that share common characteristics.
• Property Type & Use: Submarkets often distinguish between property classes (Class A vs. Class B multifamily, office, retail, etc.) within a region.
• Market Dynamics: They capture localized trends in rents, vacancy, absorption, concessions, and supply pipelines, which can differ significantly from the broader metro averages.
• Investor & Operator Use: Submarkets help investors, developers, and managers benchmark performance against more relevant peers rather than broad, citywide averages.

Example

• In Chicago’s multifamily market, the entire city might be the market, but neighborhoods like Lincoln Park, West Loop, and Hyde Park would be considered submarkets. Each has its own rent levels, demand drivers, and competitive set of properties.

Submarkets matter because real estate performance is hyper-local—what happens downtown might not reflect conditions in the suburbs or in a particular neighborhood.