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2024 Top Predictions for Commercial Real Estate Compared to 2023 Predictions

Let us compare the top predictions from 2023 to 2024. Last year there was a lot of speculation regarding a recession on the horizon which could still holds true for 2024. The top factors in 2023 to influence commercial real estate are geopolitical issues, inflation and rising interest rates which would impact all asset classes including Multifamily, Industrial, Retail and Office.

According to Joseph J. Ori, Executive Managing Director of Paramount Capital Corp. has the following top ten CRE predictions for 2023:

  • Short-term interest rates will increase by at least 1.0%
  • Capitalization rates will increase by 1.0% to 2.0%
  • Cap rates for apartment and industrial properties will increase significantly
  • The bid-ask spread for CRE property sales will begin to narrow
  • Hotels will be the most favored investment
  • There will be a sizable increase in CRE defaults and foreclosures
  • The sunbelt states will continue to attract the majority of CRE capital
  • Office investments and valuations in the gateway cities will continue to decline
  • Industrial rents will decline more than 10%
  • The single-family rental market will see reduced rents and higher lease defaults

For 2024, according to Mary Kate McGrath’s article from Northspyre the top ten trends, challenges, and opportunities to expect include:

  • Expense Mitigation Remains a Top Priority
  • Capital Markets Will Make a Slow Recovery
  • Deployment May Be Troubled in 2024
  • Class A Office Space Will Win Out
  • Environmental, Social, and Governance (ESG) Considerations Pose Opportunities and Challenges
  • Retail Demand Shows Unexpected Resilience
  • Industrial and Life Sciences Sectors Begin to Slow
  • Multifamily Faces a Mixed Outlook
  • Sunbelt Markets Continue to Grow
  • Competitive CRE Firms Leverage Technology to Ensure Successful Projects

While J.P. Morgan predicts the following:

  • Multifamily and neighborhood retail stay strong, while industrial may be starting to soften. The future of office buildings remains unclear.
  • The future of interest rates is uncertain as the economy begins to slow down.
  • It is critical that owners, operators, and investors across commercial real estate optimize their cash so they can capitalize on opportunities as they arise.

And, CBRE’s 2024 real estate market outlook includes:

  • Commercial real estate investment activity likely will begin to pick up in the second half of the year.
  • The normalization of hybrid working will continue to limit the growth of office demand.
  • The industrial market is expected to remain healthy.
  • The biggest wave of new apartment supply in decades will temper rent growth and improve affordability for renters in 2024.
  • Demand for new data center development will attract more institutional investment.

Some very insightful predictions for 2024 and, interesting comparisons to 2023. Regarding your real estate assets, it is best to be prepared and mitigate as much liability as possible in any type of market. Therefore, if you have buildings built prior to 1996, be sure to have regular inspections to determine if seismic retrofits or structural strengthening is needed,

Posted Under: Commercial & Industrial Real Estate