Commercial Real Estate in 2024: Navigating a Changing Landscape
It’s a new world out there for commercial real estate investors. The Federal Reserve’s interest rate hikes are making it more expensive to finance commercial real estate deals; and many banks have reduced lending to the sector due to concerns about rising vacancy rates and falling property values. This is having a significant impact on local investors who rely on relationships with local banks. Still, as always some sectors are faring better than others.
Necessity-based assets, such as grocery-anchored shopping centers, multifamily housing, and light industrial properties, are still performing well due to steady demand for groceries and housing, and the continued growth of e-commerce which is boosting demand for warehouse space.
Multifamily Housing: Limited Supply, Potential Rent Growth
Despite strong demand for units, the availability of capital for new multifamily complex development has decreased, leading to a slowdown in the construction of new multifamily units. This limited supply, coupled with steady demand, could lead to higher rents in 2024, making an investment in multifamily units a strong proposition if priced well.
Industrial Real Estate: E-commerce Growth Fuels Demand
Industrial real estate, which includes warehouses and distribution centers, is benefiting from the ongoing rise of e-commerce. Recent data shows that e-commerce sales continue to grow and now account for a significant portion of all retail sales in the United States. This trend is expected to continue, which bodes well for investors.
Investing in Commercial Real Estate in 2024
Investors looking to gain exposure to commercial real estate have several options. Publicly traded REITs (Real Estate Investment Trusts) are one option available to all investors. Accredited investors can also consider working with private equity sponsors who specialize in commercial real estate. These sponsors can offer investors a diversified portfolio of properties and professional management services.
By understanding the current trends and challenges in the market, investors can make informed decisions about where to allocate their capital in the commercial real estate sector in 2024.
