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Home InsightsDLA Piper's 2024 Real Estate Market Study
May 6, 2024 • 2 min read
Commercial real estate industry leaders are reporting cautious optimism for 2024, driven by expectations of stable or declining interest rates, hopes of increased investment opportunities and cautious optimism about the U.S. economy.
The rise in bullish outlooks comes after two years of dramatic sentiment pendulum movements, according to DLA Piper's 2024 State of the Real Estate Market Survey. While bearish outlooks still prevail, the 2024 DLA Piper survey reflects a notable increase in positive sentiment compared to 2023, when 86% of CRE leaders were bearish.
Interest rates are the top source of both optimism and concern for CRE leaders in 2024. Among bullish respondents, stabilization (28%) and falling interest rates (20%) were the top two reasons why respondents were optimistic about the CRE market over the next 12 months. Even for more bearish respondents, interest rates were the most common reason for concern (31%). But that number is significantly down from 2023, when 46% of bearish respondents attributed their pessimism to interest rates. The survey was conducted prior to the Federal Reserve's decision to keep interest rates unchanged on May 1 in response to higher-than-expected inflation rates.
Respondents generally believe deal volumes will increase in 2024, with a potential economic recovery and investment opportunities in distressed assets being among the top five reasons cited for optimism for the year ahead. However, with an estimated $1 trillion in commercial real estate debt coming due by the end of 2025, an overwhelming majority of respondents, 96%, believe challenges associated with refinancing existing debt will impact the industry over the next 12 months.
Respondents also reported that they consider data centers to be the most attractive asset class. Additionally, significant opportunities remain in growth markets outside of traditional gateway cities, and sentiment towards gateway cities is recovering.
Overall, the results of this year’s DLA Piper State of the Market Survey indicate growing, though cautious, optimism and cautious opportunities for the commercial real estate market over the next 12 months.
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