2023 Real Estate Overview
& 2024 Projections
Retail Comeback
Though dependence on credit continues to increase as consumers pull back on spending, the retail comeback is expected to remain healthy for the next several years. With an all-time high consumer credit card debt of $1.08T, it’s a waiting game to see how retail companies will react in regards to scaling back their real estate footprint.
Assets in 2024
Although the level of distress for assets as of Q3 2023 is $79.6B, these levels are not likely to pose an avalanche of real estate assets. While middle and low-quality assets are under significant pressure, and loan maturities will create pressure across all product types, it is worth noting that NOI is up considerably over the life of the average loan expiring over the next three years. Offices make up 41% of these distressed assets with Retail at 27%, Hospitality at 17%, Multifamily at 9%, and Industrial at 2%.
Industrial Revolution
Despite the rising vacancies and softer absorption, rates for industrial assets will remain historically healthy across most markets. While vacancy rates may climb due to softer demand and a wave of new supply, rent growth is expected to persist but at a more sustainable, modest pace in the coming year.
New & Improved Offices
Those in the market for new or recently renovated offices are in good company, with the demand outweighing the supply, despite only accounting for 10%-15% of the total available inventory. Companies are looking to expand into better spaces with diverse amenities, which won’t meet the flight-to-quality demand long term. This provides opportunities to investors to renovate existing spaces to boost delivery rates.
Multifamily: Under Pressure
Pressure is expected to remain on multifamily developments through 2024, but will ease in 2025-2026. The reduction in construction starts over the past year is -62%. This comes from high construction costs, expensive financing, and opportunities to buy properties below replacement cost.
**Information regarding 2023 analysis and 2024 predicted market trends comes from Costar and Cushman & Wakefield. **