The commercial real estate market has experienced a volatile year for investors. Despite predictions of rate cuts and a potential recession, the market remained stable and active. Lightbox and Matthews Real Estate Investment Services conducted surveys to gain insight into the future of commercial real estate acquisitions and dispositions.
Looking back at 2023, Lightbox’s CRE Activity Index showed high levels of lending and investment but was hindered by rate hikes that caused sellers to hold off on deals. The index reached its lowest level in three years due to a pricing gap between buyers and sellers, as well as limited inventory.
However, analysts predict an increase in activity during the second half of 2024 with momentum building from potential Fed rate cuts later in the year. Matthews Real Estate Investment respondents were not optimistic about interest rates but believe there will be a soft-landing recession lasting more than one year.
Investors are expected to focus on opportunistic strategies in light of this forecasted economic climate. With distressed markets showing signs of improvement, such as Baltimore, Chicago, and San Francisco’s office sectors rebounding from their lows; experts anticipate higher transaction volumes towards the end of 2024.
In addition,
Lightbox predicts an early uptick in property listings with capital mobilizing for new investment opportunities.
A recent survey reveals mixed opinions among investors regarding commercial real estate trends for 2024.The past year has been tumultuous for these individuals despite initial forecasts predicting otherwise (e.g., Federal Reserve Effective Federal Fund rates). Surprisingly enough though,the much-feared recession did not occur either.LightboxandMatthewsRealEstateInvestmentServicesconductedpollstoassesscommercialrealestateacquisitionsanddispositionsinthefuture.
Reflecting upon lastyear’sperformance,Light box’sCREActivityIndexforthe fourth quarterof2019backtrackedto2017whichwitnesseda historic surgeinlendingandinvestment.However,riseinratesin2022discouragedsellersandlendersfromparticipatinginthemarket.Themarketremainedstagnantduetoapricinggapbetweenthebuyersandsellers,asmentioned in the Lightbox report. Despite hopes for a busier second half of 2023, the Federal Reserve’s H4L policy hindered investment rebounds.
As a result,theLightboxindexreacheditslowestlevelinthreeyearsindicatingadeclineof30%to40%ind ealmakingvolume.Lightboxanalystsattributethisdeclinetothelackofavailableinventory.
Looking ahead to 2024,Ligh t box analysts anticipate an increase in activity during the latter part ofthe year. Based on market data and field intelligence,FederalReserveratecutslaterthisyearareexpectedtoboostmomentum.However,inMatthewsRealEstateInvestment’ssurvey,respondentswere not optimistic about interest rate cuts;75.2%saidtheydonotanticipatemoreratehikes.Additionally,67%believe thatthere will bea soft-landing recession with37%sayingitcouldlastmorethanayear.Duetothesefactorsinvestorswilllikelyfocusonopportunisticstrategiesduringthecomingyear.
Inlinewiththisforecast,distressedmarketslikeBaltimore,Chicago,andSanFrancisco’sofficesectorsarebeginningtoshowimprovement.AccordingtoLight boxrespondents,”highertransactions”canbeanticipatedinthesecondhalfof2019.Inthenearterm,Ligh t boxpredictsanearlyuptickinpropertylistingswithcapitalmobilizingtotakeadvantageofnewinvestmentopportunities.
