Multi-Famil Faces Prolonged Recovery Amid Uncertainty

 

 

 

Executives in the real estate industry had hoped for a second-half recovery in deal activity, but now they predict a major rebound won't happen until the second half of 2024. The CEOs of prominent property brokerages like CBRE, JLL, Cushman & Wakefield, Colliers, and Newmark have lowered their 2023 outlooks. They anticipate that investment sales and lending will only improve after the Federal Reserve signals the end of interest rate increases aimed at curbing inflation. Inflation remains a challenge, leading to uncertainty about how long interest rates will stay high.

The delay in economic recovery has made predictions about when transaction activity will pick up uncertain. Some experts believe it won't happen until the Fed is done raising rates, which may not be until next year. Even if rates stabilize by year-end, property prices may continue to fall due to rising vacancy rates and slowing rental rate growth.

Multifamily and industrial real estate sectors might recover faster than others. However, a full rebound will take time, with up to $2 trillion in commercial real estate debt set to mature over the next few years. The slow process of working out troubled situations with lenders may extend this timeline. Despite the maturity schedule suggesting mass defaults, past cycles have shown this isn't the case. Lenders are more cautious now than they were during the Great Financial Crisis, underwriting loans with lower leverage.

Overall, the real estate industry faces challenges with uncertain recovery timelines, potential price declines, and a slow process of managing maturing debt. The cautious approach of lenders and the economic landscape will continue to influence the market's direction.

 

Will Amorin - KW Commercial

Summarized article that was originally written By Randyl Dummer CoStar News