How Will Commercial Real Estate Be Affected in 2024?
The commercial real estate market was significantly impacted by high interest rates, inflation, and recession threats in 2023. However, experts predict that the situation may improve in 2024.
In their report “10 Critical Questions for 2024,” Cushman & Wakefield analysts address key concerns and provide forecasts for the coming year. Here are some of the issues they discuss that could affect CRE:
– When will the Federal Reserve change its stance?
According to analysts, if there is a sustainable decrease towards the Fed’s target inflation rate of 2%, they may pivot their approach. This could happen as early as Q2 of 2024 but it also depends on improvements in personal consumption expenditures (PCE). If PCE does not improve, then we can expect interest rates to remain high.
– Will there be an increase in distressed assets?
While distress levels are expected to rise and lower-quality office assets continue to face pressure, overall NOI has increased over time for loans expiring within three years. Therefore, we should not anticipate a significant influx of distressed assets.
– Is a recession likely?
Analysts forecast a downturn at the beginning of Q1 in 2024 due to changes happening with yield curves. The Effective Federal Funds rate is mainly responsible for this factor but recent fluctuations have caused less negative spreads.
– When will capital markets recover?
The answer depends on whether or not there is a pivot from Fed policies. A potential shift would bring more stability and clarity which would benefit lenders and create healthier lending conditions overall by stabilizing financial markets through base interest rates.
Overall outlook: Analysts believe that H2 of next year holds promise for improvement with continued weakness seen primarily within office sectors while multifamily construction shows signs pointing towards positive growth trends.
By addressing these pressing concerns about what lies ahead regarding CRE performance during this upcoming period where many factors still remain uncertain, Cushman & Wakefield provides valuable insights for investors and industry professionals alike.
