{"id":1004722016,"date":"2024-07-19T01:00:32","date_gmt":"2024-07-19T09:00:32","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004722016"},"modified":"2024-07-19T01:00:35","modified_gmt":"2024-07-19T09:00:35","slug":"cre-midyear-outlook-the-calm-after-the-storm","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/cre-midyear-outlook-the-calm-after-the-storm\/","title":{"rendered":"CRE Midyear Outlook: The Calm After the Storm"},"content":{"rendered":"
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CPE<\/em> Editorial Director Suzann Silverman in conversation with Jeff DeBoer of The Real Estate Roundtable, Mark Rose of Avison Young, Jeb Belford of Clarion Partners and Stacie Trott of DLA Piper. Screenshot by Michelle Matteson<\/em><\/figcaption><\/figure><\/div>\n\n\n

Commercial real estate development and investment is no stranger to cycles of recovery<\/a>, expansion, supply booms and recessions. This round appears to have passed the recession and is slowly inching toward recovery, according to panelists at Commercial Property Executive<\/em>\u2019s Midyear Outlook 2024<\/a> webinar, moderated by Editorial Director Suzann Silverman.<\/p>\n\n\n\n

While persistent challenges around interest rates, a lack of available debt, construction costs<\/a> and geopolitical uncertainty remain, the panelists\u2019 outlook remained positive, with most anticipating a recovery in 2025.\u00a0Mark Rose, CEO of Avison Young, holds this view: \u201cIt doesn’t look like it’s going to get any worse, and we look like we’re positioned for a recovery,\u201d he said.<\/p>\n\n\n\n

For Rose, hampering recovery the most is both banks\u2019 and smaller lenders\u2019 near-complete exit from the market, as well as the muted investment volumes, which, amounting to $71 billion in the first quarter, have fallen<\/a> by 19 percent year-over-year, according to CBRE. \u201cBecause of the lack of debt, we will have to push back some of the expectations for a bigger bounce back into the back half of 2025,\u201d Rose noted.<\/p>\n\n\n\n

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READ ALSO:<\/strong> BOMA 2024 Conference Highlights<\/a><\/p>\n\n\n\n

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Adding fuel to this fire are the Fed\u2019s potential decisions around interest rates, and Rose doesn\u2019t see the needle move until after November\u2019s elections. Before this happens, the uncertainty around investing, mostly in the short term, is likely to persist. \u201cAs much as we would like a decrease in September, we are likely to get some action after the election, but from there on out, things are falling into place where you have those incremental gains,\u201d Rose predicted.<\/p>\n\n\n\n

On the other hand, some see the Fed\u2019s moves as being more symbolic in nature, given the inaccuracies the organization has related to when measuring inflation; often, part of the data can be a year old, leading Rose to believe that inflation is much lower than the Fed is letting on.<\/p>\n\n\n\n

In turn, the Fed\u2019s decisions may not be the be-all-end-all of the investment landscape. \u201cThe way the Fed measures inflation is catching up; it was wrong for the last year or so, and the real numbers are coming in,\u201d weighed in Jeff DeBoer, founding president & CEO of The Real Estate Roundtable.<\/p>\n\n\n\n

A positive attitude, despite the troughs<\/h2>\n\n\n\n

Despite near-term hurdles, the last thing that investors should feel is pessimistic, given strong fundamentals around retail space and industrial assets, as well as select elements of the office sector. \u201cWhat people are getting emotional about are the facts, but this is part of a cyclical reality that has remained true for all of our lifetimes,\u201d pointed out Stacie Trott, Co-Chair of Global Real Estate Practice & Co-Chair of New York Real Estate Practice at DLA Piper. \u201cDepending on where you are, it\u2019s an opportunity to buy,\u201d Trott added.<\/p>\n\n\n\n

Jeb Belford, managing director & chief investment officer at Clarion Partners, sees such negative views as creating a self-fulfilling prophecy. \u201cIf we remain in a continued uncertain period where they are not willing to commit capital, transactions remain slow and don\u2019t move much to the positive, that will continue to wear on people. The more worn-out people get, the more (it hampers) on what you think would be a natural recovery,\u201d Belford added.<\/p>\n\n\n\n

Rose agreed, and pointed to the examples of grocery-anchored retail, outdoor storage and data centers<\/a> as going from unknowns just a few years ago to some of the industry’s top investment performers for investors.  \u201cIt was not in our vocabulary to talk about them,\u201d Rose reflected. Real estate in general is not being overbuilt, but you do have to pay attention to what makes up this industry,\u2019 Rose added.<\/p>\n\n\n\n

Is the office sector really faring that badly?<\/h2>\n\n\n\n

Even the office sector has its upsides, if one is realistic about its prospects. Belford, despite having a \u201cbearish\u201d view on the office market, pointed to the fact that much of the high vacancy rates are owed to both a lack of company expansions and smaller leases, as opposed to an aversion to working in-person. \u201cWhat are the tenants really doing when they have to face the decision to renew or move is they are taking, on average, 20 percent less space than they had before, and that pattern has not yet changed,\u201d Belford said.<\/p>\n\n\n\n

When it comes to office leasing, Rose observed some of the decision-making as shifting from the CEO to the CFO, with office space and usage being seen as a potential cost-saver. Even tenants at the prestigious One Vanderbilt are undergoing the same shrinkage of space while paying triply the average rent, according to Rose. \u201cSome of this is decision-making in this period of back-to-back black swans, but some of this should have happened a long time ago,\u201d Rose opined.<\/p>\n\n\n\n

Like retail before it, the office sector is in need of a revision of how people want to work. Given the fact that offices located in mixed-use business districts boast far stronger fundamentals<\/a> than those downtown, investors and developers would do well to turn urban cores into experiences as opposed to commodities. Even in Washington, D.C., DeBoer\u2019s base of operations, \u201cevery parking lot and restaurant is filled, and Biden has called people to come back to work.\u201d<\/p>\n\n\n\n

In Chicago, also seeing historically high office vacancy rates, \u201cSouth Street is as dead as a doornail, but at one end, Google\u2019s headquarters (at Fulton Market) is being built downtown,\u201d according to Rose.<\/p>\n\n\n\n

Will the election results change things?<\/h2>\n\n\n\n

A topic hovering over the entire discussion were the results of the upcoming presidential election. Even though there may be changes to tax code under a second Trump administration, most panelists see whoever occupies the White House as not meaningfully affecting the CRE investment and development.<\/p>\n\n\n\n

No matter the results, DeBoer believes that CRE investors have a new opportunity to educate the public about the value of the industry, so that Washington no longer views it as what Rose refers to as \u201ccollateral damage.\u201d\u00a0<\/p>\n\n\n\n

Pointing to his organization\u2019s record, DeBoer reflected, \u201cWe have changed the narrative in the last 25 years away from rich people and have connected the dots in terms of what real estate brings in terms of local budgets for jobs, and helping people save for their retirements.\u201d <\/p>\n\n\n\n

\u201cThey don\u2019t hate you, and we just have to have the facts and present them in a rational way that is long term,\u201d DeBoer concluded.<\/p>\n","protected":false},"excerpt":{"rendered":"

There’s much to look forward to, says our panel of industry leaders.<\/p>\n","protected":false},"author":3012,"featured_media":1004722017,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,21748,23891,21742,21747,21749,21797],"tags":[33022,32789,32790,33026,33981],"class_list":["post-1004722016","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-industrial","category-national","category-latest","category-office","category-retail","category-webinars","tag-avison-young","tag-cbre","tag-clarion-partners","tag-dla-piper","tag-the-real-estate-roundtable"],"acf":[],"yoast_head":"\nCRE Midyear Outlook: The Calm After the Storm - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"Jeff DeBoer (The Real Estate Roundtable), Mark Rose (AY), Jeb Belford (Clarion) and Stacie Trott (DLA Piper) talk about CRE in H2 of 2024.\" \/>\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\/cre-midyear-outlook-the-calm-after-the-storm\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CRE Midyear Outlook: The Calm After the Storm\" \/>\n<meta property=\"og:description\" content=\"Jeff DeBoer (The Real Estate Roundtable), Mark Rose (AY), Jeb Belford (Clarion) and Stacie Trott (DLA Piper) talk about CRE in H2 of 2024.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/cre-midyear-outlook-the-calm-after-the-storm\/\" \/>\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=\"2024-07-19T09:00:32+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-07-19T09:00:35+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2024\/07\/CPE_Voices_Panel_071824.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gabriel Frank\" \/>\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\/cre-midyear-outlook-the-calm-after-the-storm\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/cre-midyear-outlook-the-calm-after-the-storm\/\",\"name\":\"CRE Midyear Outlook: The Calm After the Storm - 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