Connect CRE recently spoke with economic experts to get their forecast for the second half of 2024. This is the final article in a four-part series, with previous articles covering topics such as economic recap and Federal Reserve actions, labor and spending trends, and the state of the banking sector.
The current state of the U.S. economy can be described as a mixed bag. While there has been an increase in Q2 real GDP estimates, employment growth is starting to lag behind. The Federal Reserve also continues its stance on keeping interest rates high until inflation shows signs of decreasing.
When discussing their outlook for 2H 2024, most experts agree that it may be time for the Fed to start cutting interest rates. However, opinions differ on how many cuts will occur and what impact they will have on both overall economics and commercial real estate.
Some believe that even if short-term rates decrease slightly due to rate cuts from the Fed, credit conditions will remain tight across various sectors including commercial real estate (CRE). Others suggest that a single rate cut could act as a catalyst for financing activity in certain sectors like multifamily properties where operating fundamentals are strong.
However,the political landscape could also play into market volatility leading up to this year’s election which may affect CRE markets negatively or positively depending on how investors react.
Despite potential challenges such as job loss impacting leasing season traffic or sluggish office absorption due to high vacancy rates in some cities,some economists remain optimistic about investment opportunities during this period.While transaction activity may not reach levels seen during recent years,it is expectedto improve comparedto earlier periods when capital was slow movingdue tolending standardsand other factors.However,challenges still existin areas like construction pipelines being slowed byhighinterestrates,tight lending standards,inflation,and supply chain issues.In spiteof these concerns,historicallythe market has shown resilience through innovationandit’s likelythat any current setbackswillbe temporaryas long asthere is solid economic growth.
