CPE Executive Council: 2024’s Surprising CRE Trends
So far, 2024 has been anything but business as usual, and there have been a lot of unexpected trends in the CRE industry. The CPE Executive Council shares their biggest surprises so far.
Follow Previous Cycles
My biggest surprise was that industry participants were surprised by a recovery that didn’t appear in 2023 and has yet to recover in 2024. Change starts incrementally and then takes off, but it happens over time. If you followed previous cycles, office recovery was to start this year and take a few more years. It was truly surprising to listen to the complaints or positive forecasts when the lack of Fed action, stubborn inflation and higher interest rates has played out exactly as one would think. —Mark Rose, CEO, Avison Young
The Rise of Retail
One of the most surprising trends in commercial real estate (CRE) for 2024 is the emergence of retail as a strong performer. Despite the long-standing challenges faced by traditional malls, neighborhood retail centers in urban and suburban areas have shown remarkable resilience and growth. This shift is largely driven by the increasing demand for convenience and local shopping options.
Another unexpected trend is the softening of the industrial sector. While industrial properties, especially those related to cold storage, have been strong performers, there’s a noticeable moderation as the post-pandemic demand for inventory decreases. —Doug Ressler, Manager, Business Intelligence, Yardi
Risk and Reward
The biggest surprise is that we dodged the bullets—office sector went through essentially a depression with zero capital and negative valuation and the level of defaults remained tolerable. Multifamily even with all the risky and marginal lending in 2020-21 and the excess supply in 2024 is holding up. Retail, which everyone predicted the demise of over the past 10 years, is again a desired asset class. Seem like we have figured out the risk/reward and capital is smarter. I will credit transparency and machine learning for a lot of it because the natural instincts in the past would have been to over-react and drive us over a cliff. —Shekar Narasimhan, Managing Partner, Beekman Advisors
Silver Linings
The biggest surprise for me has been that we are actually seeing some office leasing submarkets that are doing okay and not all submarkets in a particular city are equally seeing struggles. There is some positive news out there. —Dave Ebeling, Owner, Ebeling Communications
Interested in joining the CPE Executive Council and being featured in future articles? Email Jessica Fiur.
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