Anticipating a Resurgence: Commercial Real Estate Investment Sales in 2024

Anticipating a Resurgence: Commercial Real Estate Investment Sales in 2024

As we step into 2024, there’s optimistic news for the commercial real estate market. According to an article by GlobeSt.com with an interview of John Chang, National Director of Research and Advisory Services at Marcus & Millichap, investment sales are expected to reach pre-pandemic levels this year. After a sluggish 2023, the industry is set to experience a revival, driven by several factors, outlined below.

Resilient Industry and Economic Forecast:
Chang notes that the commercial real estate market remained consistent from 2014 to 2019, with a temporary setback in 2020 due to the pandemic, with a significant resurgence in the following two years. While sales experienced a dip of 20% to 25% in 2023 compared to the unusually active years of 2021 and 2022, Chang anticipates a recovery in 2024, aligning with pre-pandemic levels. The consensus economic forecast suggests a soft landing with low recession risk, supported by declining inflation rates and positive job creation.

Economic Tailwinds and Positive Indicators:
Marcus & Millichap forecasts 1.7 million jobs to be created in 2024, with the unemployment rate expected to remain near 4%. Chang highlights several positive indicators, including inflation-adjusted core retail sales, service industry metrics, consumer sentiment, and corporate profits. These factors collectively provide a modest economic tailwind, instilling confidence and reducing uncertainty among investors.

Falling Interest Rates:
One of the pivotal factors contributing to the revival is the decline in interest rates. Chang reports that interest rates are expected to continue moving lower throughout the year. The 10-year treasury, which peaked at 5% last October, has come down to the 4% range. Wall Street predictions indicate a high probability of rate reductions, with rates potentially lower than 4% by the end of the year. As the cost of debt decreases, it is likely to close the buyer-seller expectation gap, supporting increased investment activity.

Abundant Capital Waiting to Enter:
A significant driver of the anticipated surge in commercial real estate activity is the substantial capital waiting to be invested. Chang mentions an approximate $240 billion of “dry powder,” nearing the record level set in 2021. While the deployment of this capital may take time, the sheer volume of available funds, coupled with the factors mentioned above, suggests a robust second half of 2024.

The commercial real estate market is poised for resurgence. Investors should consider this opportune moment to explore potential investments and capitalize on the expected uptick in activity. As your trusted investment sales advisor, we are here to guide you through this exciting phase. Don’t miss out on the potential opportunities that 2024 has in store. Contact us today to discuss how you can position yourself for success in the evolving commercial real estate market.