With the second quarter of 2024 coming to a close, it’s time to reflect on the past and look towards the future. On June 19, 2024, Chicago was host to an episode of Walker Webcast featuring Willy Walker (Chairman and CEO of Walker & Dunlop) and guest Peter Linneman (Founder and President of Linneman Associates). The two discussed trends from their attendance at the Bennett Zell Classic Roundtable event.
During their conversations with other industry leaders, they found that many have bought into the idea that interest rates will remain high for a longer period. However, Linneman disagreed with this notion as he believes rates will decrease by year-end. They also agreed that there is capital available for projects but lenders are hesitant due to risks involved.
The discussion then shifted towards various real estate sectors with a focus on office spaces. One topic was Kastle Systems Data which measures space usage through card swipes and technology. While this data shows about 55-60% occupancy in most places, building owners report higher numbers during weekdays when security systems are used.
Linneman also shared his calculations regarding office vacancy rates which suggest that supply pipeline plays a significant role in determining these rates rather than demand growth alone.
On another note, industrial properties are performing well despite an increase in supply as there is still strong demand from tenants looking for warehouse spaces.
The shortage of single-family housing was also addressed during the webcast where it was estimated that around three million homes need to be built annually over ten years just to meet population growth demands. However NIMBYism (Not In My Backyard) attitude among communities may hinder progress along with potential economic downturns affecting capital availability for construction projects.
When asked about rate cuts by Federal Reserve Chairman Jerome Powell ,Linnemann predicted three cuts totaling up-to seventy-five basis points before end-of-year citing previous instances where Fed predictions were inaccurate. He also believes that the Fed will eventually realize that their current metrics for measuring inflation and determining rate cuts are not ideal.
In conclusion, Linneman advises moving forward with real estate projects despite challenges in securing capital as opportunities may arise quickly when market conditions change. The Walker Webcast episode featuring Peter Linneman is available for on-demand viewing through various channels such as YouTube, Spotify and Apple Podcasts. Subscribe to these channels to stay updated on future episodes of Walker Webcast where industry experts share insights and discuss current trends in commercial real estate.
