As we near the end of Q2 2024, it is important to reflect on past trends and anticipate what is to come. Recently, on June 19th, the Walker Webcast broadcasted from Chicago with host Willy Walker (Chairman and CEO of Walker & Dunlop) and guest Peter Linneman (Founder and President of Linneman Associates). They discussed insights from the Bennett Zell Classic Roundtable they attended which featured some of the top minds in real estate and finance.
During their conversations with others at this event, two main themes emerged. First was a belief in higher interest rates for an extended period. However, Linneman disagreed stating that he believes rates will decrease this year. The second consensus was that there is available capital for projects but it remains on hold due to risk aversion among lenders and equity partners.
Linneman also shared his thoughts on various real estate sectors including office space where he referenced Kastle Systems Data as a measure for space usage through card swipes. He noted that while this data shows around 55-60% occupancy levels in most places, discussions with building owners revealed higher numbers during weekdays when security systems are used more frequently.
In terms of vacancy rates in offices specifically, Linneman provided a calculation based off current vacancy compared to pre-pandemic levels suggesting an increase due to supply pipelines being affected by low demand growth despite employment increases.
On another note industrial spaces have been performing well recently becoming one of the most sought-after asset classes according to both hosts who also touched upon single-family housing shortages caused by factors such as NIMBYism (Not In My Backyard) attitudes towards development projects along with local zoning requirements making it difficult meet housing demands even though there has been significant population growth over time requiring approximately one million new homes per year just keep up .
When asked about potential rate cuts by Federal Reserve’s Effective Federal Funds Rate ,Linneman maintained his prediction of three rate cuts by the end of 2024. He also mentioned that the Federal Reserve may not have accurate metrics for measuring inflation or determining rate cuts and could potentially surprise themselves with faster decreases.
In terms of real estate projects, Linneman advised to continue moving forward despite challenges in securing capital as it can quickly change once risks are taken by investors. The June 19th Walker Webcast is available for replay on YouTube, Spotify and Apple channels with new episodes released weekly. Subscribe to stay updated on future discussions about capital markets, asset types and more in the real estate industry.
