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Answers to Pressing 2024 Concerns
High interest rates, ongoing inflation, and recession threats – all of these impacted commercial real estate in 2023. Will the same be true in 2024?
Not necessarily. In its “10 Critical Questions for 2024” report, Cushman & Wakefield analysts introduced ten concerns for the coming year and then provided answers and forecasts. What follows are some of the issues analysts addressed that are likely to impact CRE in the coming year.
When will the Federal Reserve pivot?
Cushman & Wakefield analysts forecast that the Fed will change its stance if there is “sustainable downward movement” toward the 2% inflation target. The analysts forecast that this could happen in Q2 2024 but offered the caveat that the personal consumption expenditures (PCE) must improve. If the PCE refuses to budge, the Fed won’t either and “H4L (higher for longer) will extend beyond what we believe,” the analysts said.
Will we see an avalanche of distressed assets?
This is a hard no. Yes, distress levels will continue increasing. And yes, lower-quality office assets remain under pressure, while loan maturities will also exert pressure across all asset types. But “it’s worth noting that NOI is up considerably over the life of the average loan expiring over the next three years,” the Cushman & Wakefield analysts pointed out.
Will there be a recession in 2024?
Cushman & Wakefield analysts forecast a downturn in Q1 2024, suggesting that readers “watch for a de-inversion in the yield curve.” While this factor is mainly driven by a decrease in the Effective Federal Funds rate, “a recent steepening at the long end caused the spread to become less negative,” the analysts explained.
When will capital markets turn the corner?
The answer to this depends on whether the Fed pivots. The Cushman & Wakefield analysts said such a pivot “will give lenders more clarity, stabilize financial markets (base interest rates), and provide a healthier foundation for lending.” As such, the analysts’ best guess when answering this question is H2 2024, citing a continued weak office sector and “early signs of an inflection in multifamily and construction.”
- ◦Financing
- ◦Economy
- ◦Policy/Gov't
