Investment Sales Expected to Improve in H1 2024

Article originally posted on Globe St. on August 11, 2023

Despite better-than-expected economic growth in the first half of the year, concerns over the U.S. economic outlook dampened investor sentiment, according to a new report from CBRE.

The firm said uncertainty about where interest rates were going and tightening lending standards by regional and community banks took a toll.

CBRE expects to see improvement during the first half of 2024 as “economic conditions stabilize and a clearer outlook emerges for borrowing rates.”

As for Q2, Americas commercial real estate investment volume fell by 63% year-over-year in Q2 to $80 billion.

There were plenty of negative reads to go around. Multifamily fell the most (-66%) but continued to attract the most capital ($39 billion, down 66% from a year ago). Industrial declined the least (-41%).

Office investment fell 60% to $29 billion. Retail investment fell by 58% to $19 billion.

Fannie Mae and Freddie Mac should provide some comfort to multifamily in the coming quarters. It’s noteworthy that apartment demand was strong in Q2 despite the chatter about a recession.

Industrial fundamentals remained strong “and a decrease in construction starts could lead to a dearth of available supply in 2024 and 2025,” CBRE said.

In office, CBRE said distressed sales or motivated sellers will likely be the most active participants through this year.

Retail investment in the Americas fell by 65% year-over-year in Q2 to $10 billion.

The restart of student loan payments in October and overall diminishing savings likely will weaken U.S. retail spending in Q3 and Q4. The lack of new supply will provide a cushion to the degradation of retail real estate fundamentals.

“There is the potential for a notable increase in activity during the second half of the year,” CBRE said.