Commercial Real Estate Market Report: Q3 2024

The much-anticipated Fed rate cut finally happened in September with the board surprising some with a 50-basis point reduction. On the heels of this announcement, the major stock market indices have trended upwards and the latest job numbers were surprisingly strong with the unemployment rate reversing recent trends and decreasing.

The U.S. economy has continued to remain extremely resilient. Headwinds and threats in commercial real estate, however, remain present.

Key takeaways

• Multifamily housing: Although the multifamily real estate sector continues to face operational challenges in the form of stagnant rental rates and increasing operating expenses, trends are improving. Going forward, there will continue to be difficulties, particularly on a localized basis. However, investors view these issues as navigable, and the long-term fundamental outlook of the sector is strong, as evidenced by rising investment activity. We believe fundamentals are beginning to normalize and should be in position for a positive turn in 2025.
• Office: On one hand, office foot traffic has improved with young professionals seeking in-office opportunities for career growth, mentorship and social interaction, but on the other hand, office vacancies remain at all-time highs, near 14%. The signs of an office sector recovery remain stubbornly mixed, leaving lingering questions around additional rate cuts. Will they occur? If so, will they arrive in time for distressed owners to take advantage before foreclosures or will other workouts be required?