How will the commercial real estate market be affected by high interest rates, inflation, and recession threats in 2023? Will these factors continue to impact the industry in 2024?
It is uncertain. In their report “10 Critical Questions for 2024,” analysts at Cushman & Wakefield address ten key concerns for the upcoming year and provide insights and predictions. Here are some of the issues they discuss that could potentially influence CRE in 2024.
When will there be a shift in Federal Reserve policy?
According to Cushman & Wakefield analysts, if there is sustained downward movement towards reaching the Fed’s target inflation rate of 2%, they predict that there may be a change in stance during Q2 of 2024. However, this forecast comes with a caveat – personal consumption expenditures (PCE) must also improve. If PCE does not show improvement, then it is likely that interest rates will remain higher for longer than expected.
Will we see an increase in distressed assets?
The answer here is no. While distress levels may continue to rise and lower-quality office assets face pressure along with loan maturities across all asset types; it should also be noted that net operating income (NOI) has significantly increased over time since most loans expiring within three years have been taken out.
Is a recession on the horizon for 2024?
Cushman & Wakefield analysts anticipate a downturn during Q1 of next year but suggest keeping an eye out for any changes or de-inversion within yield curves as this factor can largely affect effective federal funds rate which has recently seen less negative spreads due to steepening at long end according to experts’ explanations.
When can we expect capital markets recovery?
This depends heavily on whether or not Federal Reserve pivots its policies accordingly as doing so would bring more stability into financial markets while providing lenders better clarity when making decisions about lending practices based off healthier foundations such as base interest rates. Based on these factors, analysts predict a potential recovery during H2 of 2024 with weak office sector and early signs of improvement in multifamily and construction sectors.
