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Investor Surveys Generate a Mixed Bag for 2024
There’s little doubt that the past year has been volatile for commercial real estate investors. Much of what was forecast didn’t pan out (i.e., cuts in the Federal Reserve Effective Federal Fund rates). Nor did the much-anticipated recession materialize.
Lightbox and Matthews Real Estate Investment Services polled different investor groups to better understand where commercial real estate acquisitions and dispositions are likely to go.
The Rearview Mirror
Lightbox’s CRE Activity Index 4Q 2023 backtracked to 2021, which marked “historic levels of lending and investment.” But the rate hikes of 2022 kept sellers on the sidelines as lenders pulled back from the sector.
Even with fewer aggressive rate hikes in 2023, “the market remained on pause due to a wide pricing gap that developed between buyers and sellers,” the Lightbox report noted. Hoped-for forecasts about a busier second half of 2023 never materialized, and the Federal Reserve’s H4L policy depressed investment rebounds.
As a result, “the (Lightbox) index was at its lowest level in three years, consistent with dealmaking volume that was 30% to 40% below 2022,” Lightbox analysts said. Adding to the problem was the lack of available inventory.
The Look Ahead
Lightbox analysts anticipate a busier 2024 – at least during the second half. “Based on the latest market data and other intelligence from the field, momentum is starting to build,” analysts said, pointing out that Fed rate cuts between late April and July would add to that momentum in the latter part of the year.
However, investors polled by Matthews Real Estate Investment weren’t optimistic about interest rate cuts, but 75.2% said no more rate hikes are anticipated.
Additionally, 67% of Matthews Real Estate’s respondents believe there will be a soft-landing recession, with 37% of those surveyed predicting it would last more than a year. Because of this and other factors, investors will likely focus on opportunistic strategies in the coming year.
Along those lines, with bottoms forming in many distressed markets, like the office sector in Baltimore, Chicago and San Francisco, Lightbox respondents forecast “higher transactions in H2 2024. In the near term, Lightbox predicted “early signs of a moderate uptick in property listings,” with capital mobilizing to “take advantage of the expected new wave of investment opportunities.”
- ◦Sale/Acquisition
- ◦Financing
- ◦Economy
- ◦Policy/Gov't
