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CBRE foresees economic growth slowing in 2024, though a recession may be avoided and real estate transaction values will decline further, creating compelling buying opportunities, according to the company’s 2024 U.S. Real Estate Outlook.
“There is a bit more real estate pain ahead, but stabilization and the early stages of recovery aren’t far behind that,” says Richard Barkham, CBRE global chief economist and global head of research. “Investment volumes will be down overall for 2024 but will start an upturn in the second half. And leasing activity will pick up a bit from a sluggish 2023.”
Key takeaways:
- CBRE’s economists anticipate that resilient consumer spending will counter economic headwinds next year, including high interest rates and near recessions in Europe and China. CBRE predicts the U.S. unemployment rate rising slightly to 4.5% and an easing of inflation that will allow the Federal Reserve to reduce short-term interest rates to around 4.25% by the end of 2024 and to 3.5% in 2025.
- This anticipated economic bottoming out and initial rebound will affect all sectors of commercial real estate. CBRE sees lending remaining tight, property values declining further in the first half of the year before activity rebounds in the second half, a topping out of office vacancy, and a wave of multifamily construction.
- A long-running lack of new retail construction will contribute to retail availability rates declining by 20 bps in 2024 to a scant 4.6%. CBRE foresees retail spending moderating to 2.6% in 2024 from 4.4% in 2023, and net absorption, which is new demand for retail space, declining to 28 million square feet from 35 million square feet a year earlier.
- The industrial and logistics sector will be active in 2024, with net absorption on par with 2023 and annual taking rent growth moderating to an 8% gain by year end. Construction completions will amount to half of the 2023 total. Vacancy will rise to around the five-year average of 5% by mid-2024 from 4.2% in Q3 2023 but will decline the second half of the year due to a significant decline in new construction. The forecast 7.5% increase in U.S. industrial production over the next five years bodes well for demand for U.S. manufacturing and distribution space.
