Just as sailors need a lighthouse to illuminate the path forward, real estate investors seek insights about market trends. Marcus & Millichap’s CEO, Hessam Nadji, recently shared insights about 2024 real estate trends that are a beacon of cautious optimism amidst a storm of high interest rates and economic uncertainty.
Resiliency: Commercial real estate (“CRE”) has proven to be a resilient investment over time, consistently outperforming the stock market across a 20-year span.
Multifamily Belle of the Ball: Multifamily properties have historically been the darling because of their stability and consistent demand for housing. After a notable spike in rent growth followed by some pullback driven by new apartment developments, occupancies remain robust and rents are holding steady. Much of the new supply is concentrated in major metros like Dallas, Austin, and Atlanta, which also happen to be job creation hubs.
Reinvented Retail: Retail has reinvented itself post-pandemic. With minimal new supply, brick-and-mortar retail has emerged as one of the leading property types in this evolving landscape.
Cyclicality: Like any sector, CRE goes through cycles. Its most recent cycle has been defined by elevated interest rates and economic uncertainty, leading to a pricing disconnect between buyers and sellers, particularly in the apartments segment where yields were exceptionally low given their favored status among investors. The cyclical nature of the industry suggests that this phenomenon is temporary.
Short-Term Outlook: Over the next two quarters, we expect price discovery to stabilize, providing greater clarity for revaluing CRE in the context of higher interest rates and prompting investors to reevaluate their CRE investment strategies.
Long-Term Outlook: There’s record capital waiting on the sidelines, eager to enter the CRE market. Looking ahead to 2024-2025, there’s optimism for acquisition opportunities. The market has already witnessed some price adjustments, making it an opportune time for investors.
Thus far into 2024, the Volhawk Team is noticing stronger deal flow than we witnessed in 2023, with downward adjusted pricing. Interest rates are less volatile, reducing uncertainty in our underwriting. Volhawk is one of those groups on the sidelines ready to take advantage of the opportunities that lie ahead.
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