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  • Writer's pictureRealFacts Editorial Team

Here’s What Real Estate Pros Learned in the First Half of 2024 — and Expect in Coming Months


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As commercial real estate professionals reach the midpoint of 2024, their initial goal of simply surviving until 2025 has been met with mixed outcomes. Despite hoping for improved conditions, property executives have found that the year has underscored the unpredictability of the market, with high interest rates and economic uncertainties continuing to impact the industry. 


Office Valuations: A New Reality


The national office market has faced significant challenges in 2024. A decline in property valuations has become a central theme, with trophy office towers in cities like Los Angeles, Chicago, New York, and Philadelphia selling for a fraction of their previous prices. This decline is driven by a shrinking pool of buyers and sellers eager to offload properties at any price. According to CoStar data, office sales nationally fell more than 55% over the past year to $35 billion, marking a nearly 15-year low. High vacancy rates and declining rents have further pushed prices downward.


Kevin Shannon, Newmark's co-head of U.S. capital markets, told CoStar News, "We've seen the worst from a capital markets perspective, and while we might not be at the bottom just yet, we're close to it." Despite the ongoing challenges, there is a growing sense of stability, with more investors willing to take advantage of significant discounts.


Housing Market: Signs of Improvement


The housing market, particularly for existing single-family homes, condos, and co-ops, has struggled with a chronic shortage of inventory. This shortage, often attributed to homeowners holding onto historically low pandemic-era mortgage rates, is known as the "lock-in effect" or "golden handcuffs." However, there are glimmers of hope on the horizon. In May, the supply of existing homes for sale in the U.S. reached its highest level in four years, according to the National Association of Realtors. Some metropolitan areas, particularly in Texas and Florida, have even returned to pre-pandemic levels of housing supply.


Lawrence Yun, the chief economist for the National Association of Realtors, noted, "Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months." This increase in supply is a promising sign for consumers looking for more options before making purchasing decisions.


Retail Market: The Investor's Darling


While the office market stumbles and the housing market shows tentative signs of recovery, the retail market has emerged as a bright spot for investors. Historic low vacancy rates and a stagnant construction pipeline have created fierce competition for retail space. Retailers, bullish on expanding their real estate portfolios, are less choosy about the spaces they occupy, often opting for available locations to meet their growth targets.


Looking Ahead: Uncertain Yet Hopeful


The first half of 2024 has taught real estate professionals valuable lessons about market volatility and the importance of adaptability. High interest rates have remained a persistent challenge, affecting various aspects of the property market, from housing sales and inventory to office transactions and valuations. As the Federal Reserve considers future interest rate cuts, real estate executives remain cautiously optimistic about the second half of the year.

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