The commercial real estate industry has been operating in a volatile environment, starting with the pandemic and moving through the current scenario of market instability and even geopolitical issues. Things aren’t necessarily going to improve in 2024. But Deloitte’s “2024 Commercial Real Estate Outlook: Finding Terra Firma” suggests that “the coming year is expected to be pivotal in real estate firms’ ability to recover and build up,” the report indicated.

In its survey of 750 CFOs at commercial real estate owners and investment companies around the world, the Deloitte Center for Financial Services found that:

Most anticipate lower revenues in 2023, meaning a reduction in overall expenses and spending in 2024

Many respondents anticipate CRE property sector fundamental conditions to “worsen since we began the survey in 2018.” The most significant changes in fundamental expectations were the availability and cost of capital. Also likely to worsen are vacancies, leasing activities and rental growth over the next 12-18 months.

Hybrid work strategies are not a one-size-fits-all scenario but are here to stay

The report noted that companies should let their workforces know where to complete the work and “build the right infrastructure to support a hybrid environment.” The report also indicated that the balance between dual workplaces could be taxing, with “64% of workers globally saying they have considered or would consider looking for a new job” if they were required to be back in the office full time. As such, employees are likely to be more involved with hybrid decision-making through an open line of communication.

While real estate value has expanded, the supporting technology has not

The survey showed that more than 61% of global real estate owners and investors depend on legacy technology. Real estate has been slow to implement different technologies.

Another interesting metric is that firms still rely on spreadsheets:

• 60% of the time for reporting

• 51% of the time for property valuation/cash flow analysis

9 45% of the time for budgeting and forecasting

In addition, estimates note that up to 20% of new product technologies are spent resolving existing technical issues. The report suggested that “addressing data silos and the corresponding degraded speed of data flow across the organization should be mission critical in 2024.

The report concluded by suggesting that CRE will “likely be under the microscope for the remainder of 2023 and into 2024.” As such, industry leaders need to focus on establishing a “sturdy base of operations,” while treating “industry shifts as new foundational realities.”