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Analysis: Macroeconomics, Normalization and Strategic Investing Highlight the CRE Global CRE Outlook

The last few years have been difficult for forecasters. There was the pandemic and the resulting recession. Then, sudden, high inflation spurred the Federal Reserve into action. Then, fears of a recession, which hasn’t materialized.

What will happen to CRE in 2024?

JLL answered this question with its Global Real Estate Outlook, which focused on five takeaways:

A Mixed Macroeconomic Picture

Though economic conditions are strong, JLL analysts predict that “the year ahead is expected to be uneven for many real estate markets and decision-makers.” This is because some global markets continue to struggle with inflation and recession risks.

However, “central banks’ progress in stemming inflation became evident towards the end of 2023,” the outlook stated. “This has led to broad market sentiment that interest rates are likely at their peak.”

JLL forecasts moderate economic growth for 2024 as prospects for recovery improve later in the year.

Normalization and Predictability

Falling inflation could likely mean better predictability regarding consumer and producer prices – and construction costs. Policy rates should remain stable until a cutting cycle begins in mid-to-late 2024. “Market rates may still face volatility, but the direction of travel is now downward, providing some predictability to future debt costs,” the report said.

Spotlight on Debt

There is the consensus that interest rates have peaked. But “it will take time and prolonged stability in index rates to further unlock dry power,” JLL said. The U.S. is currently the furthest in its price-adjustment cycle, followed by Europe and Asia Pacific.

Meanwhile, real estate value declines could mean new equity requirements to meet debt service covenants. JLL said that loan maturities will lead to transactions and, in certain cases, distress.

More Strategic Investing

JLL said that CRE investors will need to “balance the financial and asset management challenges within their existing portfolios” with the temptation to buy in-demand assets while taking advantage of opportunities over the next couple of years. The successful investor will have “the ability to execute offensive and defensive strategies, effectively deploy resources, and make decisions with conviction in a still uncertain climate,” JLL said.

Continued Flight to Quality

Office tenants will continue to focus on new ways of working and space upgrades, emphasizing location, design and amenities. “There will also be a mindset shift as corporate real estate leaders move from operating static assets to managing dynamic workplaces,” complete with changing occupancy levels and business requirements, JLL said. Occupiers will also increase their focus on sustainability.

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About Amy Wolff Sorter

I love content. I love writing it, visualizing it, and manipulating it to fit into different formats. I have years of experience in working with content, both as creator and editor. The content I create and edit provides assistance with many goals, ranging from lead generation, to developing street cred through well-timed thought-leadership pieces. Content skills include, but aren't limited to, articles and blogs, e-mails, promotional collateral, infographics, e-books and white papers, website copy and more.

  • ◦Financing
  • ◦Economy
  • ◦Policy/Gov't