Financial Outlook for CRE
When it comes to the new year, it’s always good to be optimistic—but also to be realistic. We all know it’s better to make attainable goals than pie-in-the-sky resolutions. For example, resolving to go to the gym once a week—can happen! Resolving to go to the gym for two hours daily—probably won’t happen and will leave you depressed and mad at yourself.
The same goes when looking ahead to the 2024 commercial real estate market. While there is some optimism, it’s more of a cautious optimism, and investors are taking note. Additionally, high interest rates are expected to limit new development.
“There’s a lot of uncertainty, and that rate of uncertainty is causing everyone to pause,” Michael Hyun of Crow Holdings told reporter Gail Kalinoski for her article “2024 CRE Forecast: Is an Investment Comeback Ahead?”
The office market is one area investors might need to be cautious. There will be more than $1 trillion in commercial real estate loans coming due in 2024 and 2025. And while good-quality and highly amenitized offices are still attractive, a lot of office properties might need to be repurposed.
Yet despite the uncertainty, there is still financing available. In fact, investors are broadening their sights and looking to niche areas such as cold storage and self storage. James Millon of CBRE told Kalinoski that debt and equity financing options are available for asset types such as data centers, production studios and life science properties (you can read more about life sciences in Gabriel Frank’s article “Attracting Life Science Tenants in Core Markets”). And don’t count out retail! Even though for years we heard about the “death of retail,” this asset class actually did very well last year, and that trend looks like it will continue in 2024.
“I believe for 2024 we’re going to have a very heavy capital program, just like we did in 2023,” Zachary Bornstein of Olshan Properties told Kalinoski.
So do your research before investing. And be realistic about the industry. But also, keep some of that optimism going!
Read the January 2024 issue of CPE.
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