The Chief Economist: Off To The Races - 4Q2024 U.S. CRE Outlook
BGO’s 4Q 2024 U.S. Commercial Real Estate (CRE) Outlook highlights a cautiously optimistic recovery across key property sectors as market fundamentals stabilize. With the Federal Reserve cutting interest rates, CRE capital markets have begun healing, leading to positive momentum for investment returns. Industrial and multifamily sectors are gradually adjusting to robust supply pipelines, with vacancy rates stabilizing and rent growth poised for reacceleration in favorable markets. Retail continues to exhibit strong fundamentals, driven by limited high-quality space and healthy consumer spending. Meanwhile, the office sector remains a challenge due to excess supply and outdated inventory but shows potential for long-term transformation through redevelopment and conversion.
Debt capital markets are improving, bolstered by lower interest rates, though structural challenges persist, especially in the office sector. Investors are increasingly drawn to CRE, with secondary property types like data centers and cold storage gaining traction. While distressed assets present opportunities, risks such as unforeseen macroeconomic shocks and policy changes remain concerns. Nevertheless, the favorable economic environment positions CRE for potentially its best sustained performance in decades, setting a positive tone for 2025.
