Slowly Falling Interest Rates Should Boost Investment Activity.

Executive Summary

  • There is an increased chance that the U.S. will avoid a recession and achieve a soft economic landing in 2024, but economic growth will slow and downside risks are elevated.
  • Commercial real estate investment activity likely will begin to pick up in the second half of 2024.
  • The normalization of hybrid working arrangements will continue to limit the growth of office demand.
  • Retail real estate fundamentals are expected to remain strong due to the scarcity of new construction deliveries over the past decade.
  • The industrial market is expected to remain healthy, with net absorption on par with 2023 levels.
  • The biggest wave of new apartment supply in decades will temper rent growth and improve affordability for renters in 2024.
  • The hotel industry will face headwinds to RevPAR growth in 2024, including competition from alternative lodging sources and a slower economy, but fewer Americans traveling internationally will benefit the domestic market.
  • Demand for new data center development will attract more institutional investment in 2024, as investors reallocate capital from the office sector to real estate alternatives.

Opportunity Amid Uncertainty in 2024

Compelling opportunities will emerge for commercial real estate investors in 2024, as high interest rates and an economic slowdown—perhaps even a mild recession—lead to bargain pricing for certain assets.

Secondary office assets have already seen sharply lower pricing due to rising vacancies, as hybrid working arrangements now appear permanent. Once interest rates begin to fall and inflation eases further, rehabilitation or conversion of underperforming office buildings to other uses will become more attractive and financially viable. This process will receive substantially more state and local government aid in 2024.

CBRE Research stands ready to help clients succeed in 2024. Please contact us at any time.

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CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world's largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.