{"id":1004695899,"date":"2023-12-28T04:33:00","date_gmt":"2023-12-28T12:33:00","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004695899"},"modified":"2024-01-08T00:58:43","modified_gmt":"2024-01-08T08:58:43","slug":"what-to-expect-for-cre-in-2024","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/","title":{"rendered":"What to Expect for CRE in 2024"},"content":{"rendered":"
\"\"<\/a>

Richard Barkham, Global Chief Economist & Head of Global and Americas Research, CBRE. Image courtesy of CBRE<\/p><\/div>\n

CBRE<\/strong> expects an economic slowdown in the U.S. next year that will impact commercial real estate with bank lending remaining tight throughout 2024, investment volume decreasing 5 percent, cap rates expanding and property values declining.<\/p>\n

But the U.S. may be able to avoid a recession and interest rates<\/a> should be reduced later in the year as activity picks up in the second half of 2024, according to the firm\u2019s 2024 U.S. real estate outlook<\/a>.<\/em><\/p>\n

Property types with relatively strong fundamentals, including demand, vacancy and rent growth, like industrial, retail, multifamily and data centers will be most favored by investors in 2024, according to CBRE.<\/p>\n

Richard Barkham, CBRE global chief economist & global head of research, said in prepared remarks there is still some more pain ahead for the commercial real estate industry in 2024, including overall investment volumes remaining down for the year. But he expects an upturn by the second half and overall leasing activity to pick up as well. He notes stabilization and the early stages of recovery are also not far off.<\/p>\n

\"North<\/a>

North America dry powder by strategy. Chart courtesy of CBRE<\/em><\/p><\/div>\n

With inflation easing, the Federal Reserve is expected to begin reducing short-term interest rates in 2024, possibly to around 4.25 percent by the end of the year and to 3.5 percent in 2025.<\/p>\n

There should be buying opportunities in the first half of 2024, especially for all-cash buyers like sovereign wealth funds, pension funds and endowments. CBRE expects the lowest pricing for assets will occur in the first two quarters.<\/p>\n

The report notes increasing cap rates, which have risen by about 150 basis points between early 2022 and late 2023 depending on the market and asset type, imply a 20 percent decline in values for most property types. For office, the increase was higher, rising by at least 200 basis points.<\/p>\n

\u201cWe think cap rates will expand by another 25 to 50 basis points in 2024, with a corresponding 5 percent to 15 percent decrease in values,\u201d the report states.<\/p>\n

CBRE expects real estate values for most property types will likely not stabilize before mid-2024.<\/p>\n

\"Historical<\/a>

Historical & forecast cap rates. Chart courtesy of CBRE<\/em><\/p><\/div>\n

Office vacancies to peak<\/h2>\n

The outlook expects another tough year ahead for the office market with office vacancy peaking at nearly 20 percent in 2024, up from 18.4 in the third quarter of 2023 and 12.1 percent at the end of 2019.<\/p>\n

CBRE notes a slowing economy in the first part of 2024 and increasing acceptance of hybrid working arrangements will continue to limit office demand next year. The 2023 U.S. Office Occupier Sentiment Survey found more than half of the respondents planned to further reduce their office space in 2024.<\/p>\n

Companies looking to lease less than 20,000 square feet will account for most of the leasing activity, according to CBRE. Leasing activity should rise by 5 percent in 2024, however that is still 20 to 25 percent lower than pre-pandemic levels.<\/p>\n

\n

READ ALSO<\/strong>: How Incentives Boost Office Conversions<\/a><\/p>\n

\n

Meanwhile, the flight-to-quality trend should continue with occupiers seeking space in newer, prime office properties with the best amenities. But office construction levels will be at their lowest levels since 2024, which could result in a shortage of that sought-after Class A space later in the year. CBRE forecasts that average prime office asking rent will increase by as much as 3 percent.<\/p>\n

On the investment side, the higher-for-longer outlook for interest rates will cause some owners of Class B and C office assets to sell due to further erosion in values. Many of those older buildings that lack modern amenities will continue to struggle to attract tenants, so a higher percentage of older office assets are likely to be converted to other uses. While office conversions can be challenging, the report notes the federal government is providing grants, low-interest loans and tax incentives and local governments are also offering incentives.<\/p>\n

Not all office markets are suffering, and the outlook shines a light on several active cities in the U.S. In Nashville, Tenn., where absorption and rents are up, demand for new office space is expected to remain strong. Miami is seeing one of the highest rent increases in the country and the vacancy rate is dropping as new-to-the market tenants are keeping the market healthy. Las Vegas has seen an uptick in leasing activity and strong preleasing at speculative projects, putting the market in a strong position heading into 2024.<\/p>\n

Industrial sector slowdown<\/h2>\n

The industrial sector should see net absorption similar to 2023 levels and rent growth moderating to 8 percent. Construction deliveries are tapering off and expected to continue to slow down due to economic uncertainty, tight lending conditions and oversupply in some markets.<\/p>\n

\n

READ ALSO<\/strong>: Property Management Success: How AI Boosts Industrial<\/a><\/p>\n

\n

Vacancy is expected to hit 5 percent by mid-2024, up from 4.2 percent in the third quarter of 2023 but decrease later in the year due to the decline in new construction. Looking ahead, CBRE is forecasting a 7.5 percent increase in U.S. industrial production over the next five years as more occupiers improve their supply chains by adding more import locations and onshoring or nearshoring of manufacturing operations. Markets to watch include Austin<\/a> and San Antonio in Texas; Nashville; Salt Lake City and Central Florida.<\/p>\n

Retail\u2019s declining availability<\/h2>\n

The retail sector is also facing a lack of new construction. That will contribute to retail availability rates dropping by 20 basis points next year to 4.6 percent. Asking rent growth is expected to drop below 2 percent for most of 2024 but go above 2 percent by the fourth quarter.<\/p>\n

\n

READ ALSO<\/strong>: Mixed Shopping Cart for Retail<\/a><\/p>\n

\n

Open-air suburban retail centers will see demand grow faster than other retail formats and neighborhood, community and strip centers will have stable occupancy throughout the year. Look for traditional mall-based retailers to seek other new formats outside the malls for expansion. Texas markets are expected to see more luxury brands. Other markets to watch include Orlando, Fla.; Charlotte, N.C.; Denver; San Francisco and Orange County, Calif.<\/p>\n

AI to fuel increased data center demand<\/h2>\n

The data center market is seeing growth, often driven by advances in cloud-based solutions, artificial intelligence and other new applications and technologies. CBRE notes demand will continue to be higher than supply and construction in major markets will exceed 3,000 MW in 2024, up from the company\u2019s 2023 estimate of 2.500 MW. Markets to watch include Austin; San Antonio and Omaha, Neb.<\/p>\n","protected":false},"excerpt":{"rendered":"

In this tight lending environment, all-cash buyers will benefit from bargain pricing, the firm predicts.<\/p>\n","protected":false},"author":1068,"featured_media":1004593844,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21755,21808,21825,21748,21783,23891,21742,21747,21749,51037],"tags":[32789],"class_list":["post-1004695899","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-data-centers","category-featured","category-finance","category-industrial","category-investment","category-national","category-latest","category-office","category-retail","category-trends","tag-cbre"],"acf":[],"yoast_head":"\nWhat to Expect for CRE in 2024 - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"CBRE expects bank lending to remain tight in 2024, CRE investment volume to drop, cap rates to expand and property values to decline.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What to Expect for CRE in 2024\" \/>\n<meta property=\"og:description\" content=\"CBRE expects bank lending to remain tight in 2024, CRE investment volume to drop, cap rates to expand and property values to decline.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2023-12-28T12:33:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-01-08T08:58:43+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gail Kalinoski\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/\",\"name\":\"What to Expect for CRE in 2024 - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg\",\"datePublished\":\"2023-12-28T12:33:00+00:00\",\"dateModified\":\"2024-01-08T08:58:43+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/fc5b5df1393e5023d2417bd48c2fda57\"},\"description\":\"CBRE expects bank lending to remain tight in 2024, CRE investment volume to drop, cap rates to expand and property values to decline.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg\",\"width\":1200,\"height\":900,\"caption\":\"Richard Barkham, Global Chief Economist & Head of Global and Americas Research, CBRE. Image courtesy of CBRE\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.commercialsearch.com\/news\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"What to Expect for CRE in 2024\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/\",\"name\":\"Commercial Property Executive\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.commercialsearch.com\/news\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/fc5b5df1393e5023d2417bd48c2fda57\",\"name\":\"Gail Kalinoski\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/04\/Gail-Kalinoski-headshot.jpeg?w=86\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/04\/Gail-Kalinoski-headshot.jpeg?w=86\",\"caption\":\"Gail Kalinoski\"},\"description\":\"Kalinoski has been a contributing writer to Commercial Property Executive and Multi-Housing News since 2010 and previously wrote for three years for Commercial Property News. Gail has been a freelance writer and editor for more than 20 years, contributing to daily websites, magazines, weekly business newspapers, market intelligence newsletters, research reports, monthly B-to-B and consumer magazines. Earlier in her career, Gail worked for Gannett Corp. as an editor and reporter for 15 years. Gail has a bachelor\u2019s degree in journalism from Pace University.\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/author\/gail-kalinoski\/\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"What to Expect for CRE in 2024 - Commercial Property Executive","description":"CBRE expects bank lending to remain tight in 2024, CRE investment volume to drop, cap rates to expand and property values to decline.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/","og_locale":"en_US","og_type":"article","og_title":"What to Expect for CRE in 2024","og_description":"CBRE expects bank lending to remain tight in 2024, CRE investment volume to drop, cap rates to expand and property values to decline.","og_url":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/","og_site_name":"Commercial Property Executive","article_publisher":"https:\/\/www.facebook.com\/CPExecutive","article_published_time":"2023-12-28T12:33:00+00:00","article_modified_time":"2024-01-08T08:58:43+00:00","og_image":[{"width":1200,"height":900,"url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg","type":"image\/jpeg"}],"author":"Gail Kalinoski","twitter_card":"summary_large_image","twitter_creator":"@cpexecutive","twitter_site":"@cpexecutive","schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/","url":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/","name":"What to Expect for CRE in 2024 - Commercial Property Executive","isPartOf":{"@id":"https:\/\/www.commercialsearch.com\/news\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#primaryimage"},"image":{"@id":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#primaryimage"},"thumbnailUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg","datePublished":"2023-12-28T12:33:00+00:00","dateModified":"2024-01-08T08:58:43+00:00","author":{"@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/fc5b5df1393e5023d2417bd48c2fda57"},"description":"CBRE expects bank lending to remain tight in 2024, CRE investment volume to drop, cap rates to expand and property values to decline.","breadcrumb":{"@id":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#primaryimage","url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg","contentUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg","width":1200,"height":900,"caption":"Richard Barkham, Global Chief Economist & Head of Global and Americas Research, CBRE. Image courtesy of CBRE"},{"@type":"BreadcrumbList","@id":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-for-cre-in-2024\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.commercialsearch.com\/news\/"},{"@type":"ListItem","position":2,"name":"What to Expect for CRE in 2024"}]},{"@type":"WebSite","@id":"https:\/\/www.commercialsearch.com\/news\/#website","url":"https:\/\/www.commercialsearch.com\/news\/","name":"Commercial Property Executive","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.commercialsearch.com\/news\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/fc5b5df1393e5023d2417bd48c2fda57","name":"Gail Kalinoski","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/image\/","url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/04\/Gail-Kalinoski-headshot.jpeg?w=86","contentUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/04\/Gail-Kalinoski-headshot.jpeg?w=86","caption":"Gail Kalinoski"},"description":"Kalinoski has been a contributing writer to Commercial Property Executive and Multi-Housing News since 2010 and previously wrote for three years for Commercial Property News. Gail has been a freelance writer and editor for more than 20 years, contributing to daily websites, magazines, weekly business newspapers, market intelligence newsletters, research reports, monthly B-to-B and consumer magazines. Earlier in her career, Gail worked for Gannett Corp. as an editor and reporter for 15 years. Gail has a bachelor\u2019s degree in journalism from Pace University.","url":"https:\/\/www.commercialsearch.com\/news\/author\/gail-kalinoski\/"}]}},"jetpack_featured_media_url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/07\/Richard-Barkham-CBRE...jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004695899","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/users\/1068"}],"replies":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/comments?post=1004695899"}],"version-history":[{"count":9,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004695899\/revisions"}],"predecessor-version":[{"id":1004696367,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004695899\/revisions\/1004696367"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/media\/1004593844"}],"wp:attachment":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/media?parent=1004695899"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/categories?post=1004695899"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/tags?post=1004695899"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}