Several large transactions were announced in the first quarter of the year, with more prognosticators optimistic for more transaction volume in 2024 both at the property level and fueled by entity deals.
Key takeaways:
Multifamily housing: The multifamily sector has continued to outperform most of the real estate markets in terms of transaction volume as investors continue to execute deals despite capital markets and operational headwinds. Vacancies have continued their slow climb and will likely increase with new supply coming online in 2024, which are expected to be the highest amount in decades.
Office: The office sector's instability persists since COVID-19, but signs of a pending recovery emerge between hurdles in the near term. Increased office foot traffic, notably in the real estate, finance and insurance sectors, signals a shift towards in-person work. High national vacancy rates persist, yet some regions have shown signs of positive net absorption.
Retail: Continued strong employment figures and resilient consumer spending are powering strong fundamentals for the retail sector as a whole. Market participants continue to creatively redevelop obsolete properties and fine-tune business models to adjust to consumer demands and create value.
Industrial: The industrial market is cooling as the glut of new supply constricted net absorption levels in the first quarter. However, the current easing of new construction starts paired with constant demand for industrial space will likely cause vacancies to tighten over the coming years while rent growth will resume its upward march.
Capital markets: REIT’s had positive returns in 2023 but were mixed to start 2024, lagging the broader equity markets and reflective of the headwinds facing commercial real estate in the current capital markets environment. Some would have hoped for rosier inflation numbers and Fed rate cuts by now, but it has been apparent for some time that any reduction in rates and resultant decrease in borrowing costs is going to happen at a deliberate pace.
