Pursue opportunities — and avoid risks — with real estate market trends

The commercial real estate market is undergoing a period of disruption, presenting both opportunities and risks for investors of all sizes.

Explore key trends below with the findings of Rosen Consulting Group and how shifts related to various property types could help you better manage unexpected change or strategically plan for your future.

Market background

To begin 2024, operating conditions remained soft, but some green shoots began to emerge in several property sectors.

COVID-19 pandemic-driven behavioral shifts led to demand-side challenges in certain sectors, mainly offices where remote work continued to transform space utilization. Other sectors, including rental apartments, struggled with an ongoing wave of new supply despite robust underlying demand.

Financial challenges

Elevated debt costs and a liquidity gridlock curtailed investment activity, causing sales volume to plummet. Few unencumbered assets have traded since 2023 and an increasing share of transactions included seller financing or other workarounds. Financing challenges were further compounded by weakening operating conditions in many property sectors.

The elevated debt costs and reduced income potential drove asset values lower. The impending wave of maturities may prove to be the largest challenge facing the real estate market in 2024.

With limited and costly refinancing options, maturing debt could continue to seek extensions or modifications while limiting equity contributions. Some lenders may become less flexible, leading to a growing number of distressed assets on the market or in special servicing.

This difficult situation for existing investors may lead to opportunities for incoming investors, particularly those focused on basis.

Areas that saw challenges include:

• Offices
• Industrial
• Retail
• Lodging
• Apartments