Survey: Bisnow Readers Split On How To Navigate CRE’s ‘Once In A Lifetime Reset’ In 2024

Bisnow readers believe commercial real estate's condition should improve slightly in the new year. But after a harrowing 2023, many in the industry say they will remain in a holding pattern until the storm has safely passed.

A likely end to the Federal Reserve’s series of interest rate hikes is buoying industry sentiment in 2024. And while the majority of the 1,775 respondents to Bisnow’s 2024 predictions survey said they don’t intend to make any major moves this year, some view the next 12 months as prime time to capitalize on the wreckage sustained in 2023.

“The current flux in the market due to uncertainty over pricing, interest rates and geopolitical events still needs time to play out before full confidence can return,” a Paris-based retail expert told Bisnow late last year. “That said, prices are revising and rental prices have rebased. A lot has happened, and now it’s becoming a really interesting market.”

Bisnow collected information about respondents' occupations, locations and years in the industry for its 2024 survey but didn't require names.

The movement of interest rates is widely viewed as the most important factor influencing commercial real estate activity in 2024, though it isn’t the sole indicator the industry is tracking. The outcome of November’s presidential election could also sway the market’s trajectory by introducing yet another layer of uncertainty.

This combination of outside factors means investors will have to work “twice as hard” to get deals done this year, one Madrid-based expert told Bisnow. Some are planning to trudge through the next 12 months by sticking to what they know. Others are throwing caution to the wind and embarking on new ventures.  

“We are not trying to survive until 2025,” a Washington, D.C., developer told Bisnow. “We are focused on preserving value of our existing portfolio, looking for new opportunities and ensuring our people are being taken care of. It is an incredible balancing act.”

No one knows for sure what 2024 holds, but past downturns have looked favorably on those willing to take risks, and this “once in a lifetime reset,” as one Atlanta office investor described it, could dictate what the next era of CRE looks like.

“Like Warren Buffet said, ‘Be greedy when others are fearful,’” a Denver-based office investor said. “I think deals will start to really pick up in H2 2024, but a lot of that will depend on what the Federal Reserve does with interest rates.”

The Federal Reserve has hinted at three rate cuts in 2024, with policymakers projecting a rate of 4.6% by year’s end. This could inspire a greater level of confidence among lenders and get capital flowing again, a New York-based investor told Bisnow.

“With the recent positive interest rate news, we expect transaction volume to increase in the second half of the year,” he said.

Yet whether the Fed sticks to its guns remained a subject of much debate among readers who answered Bisnow’s survey.

Only 12.8% of respondents said they foresee more than two rate cuts in 2024, while 38% said they expect just two cuts. Another 31.8% of respondents said they expect one cut, while 17.5% said they believe the Fed will hold off on cutting rates in 2024.

Close to $324B of commercial real estate traded hands in the first 11 months of 2023, a 55% decrease from 2022, according to data from MSCI Real Assets. 

Double-digit declines in deal volume across asset types became the norm last year, as higher borrowing costs stymied transactions. Even multifamily and industrial, long viewed as safe havens for CRE investment, saw November transaction volumes fall by 68% and 64%, respectively.

The promise of rate cuts has instilled a renewed sense of optimism among investors, yet the majority of readers who responded to Bisnow’s survey said they still plan to avoid property trades in 2024. Nearly 40% said they intend to buy, while only 7.4% said they would be willing to sell. 

Several high-profile CEOs, including Disney's Bob Iger and JPMorgan Chase's Jamie Dimon, called workers back to their desks in 2023. Two million employees were under a new in-person work requirement as of August, and another million were expected to fall into that category in the months that followed.

Despite these mandates, office usage barely budged. For most of 2023, the five-day weekly occupancy average across 10 major markets hovered around 50% of pre-pandemic figures, according to data from Kastle Systems.

Looking ahead, about two-thirds of respondents to a December survey by MRI Software and CoreNet Global said they expect no more than half of their employees to be on-site by the end of 2024. Bisnow’s survey respondents were fairly split on the matter, with 24.4% saying Kastle Systems’ Back to Work Barometer would fall short of 60% in 2024 and 21.9% saying it would reach that point. Another 19.6% said the days of 60%-plus occupancy are over.

The volume of real estate investment trusts going public is often viewed as an indicator of overall health for commercial real estate. Zero REITs issued initial public offerings in 2023, yet 11 deals to acquire publicly listed REITs were posted, with a total deal value of nearly $60B, according to Nareit. 

The plurality of Bisnow’s survey respondents, 38.4%, said they expect more IPOs and M&A deals to happen in 2024. Another 30.4% said activity will be similar to 2023. 

If the crystal ball is hazy when it comes to forecasting commercial real estate activity, it’s shattered in the quest to predict the outcome of November’s election. Bisnow’s survey elicited a range of responses — from passionate to dejected to implausible — to the question of who will become president, with one respondent even refusing to answer and instead writing, “This question is depressing.”

After sorting through some of the more unlikely answers — including Elon Musk, Dwayne “The Rock” Johnson, Steve Urkel, Mickey Mouse and Ronald Reagan — President Joe Biden edged out a narrow predicted victory by Bisnow respondents with 549 votes, followed by former President Donald Trump with 533 votes. 

Biden received the most votes of any individual, but the majority of readers said one of the three leading Republican candidates would win. Trump, Florida Gov. Ron DeSantis or former South Carolina Gov. Nikki Haley were selected as the next U.S. president by 769 readers, or 57% of respondents. Biden and California Gov. Gavin Newsom were cited by just over 41%, or a combined 557 readers. Independent Robert F. Kennedy Jr. was named as the likely candidate by 22 readers.

Katharine Carlon contributed to this story.