The 12 Deals And Trends That Defined 2024

Blackstone called it “the single most exciting strategy we have globally today,” and dropped $13B on a single development. BlackRock spent $12.5B buying GIP to get a bigger foothold in the sector. Equinix launched a $15B JV, and Blue Owl has lined up nearly $10B in deals since entering the fray in April. Nvidia became a household name, taking turns with Apple as the most valuable company on the planet.

The money that poured into data centers this year is mind-boggling.

Has the sector gotten too hot? TBD. A rising chorus says the industry is banking too heavily on artificial intelligence’s rate of growth continuing and on revenue generation justifying the cost of supporting infrastructure.

Construction of data centers slowed this fall, limited by power constraints, labor shortages, shifting design demands, rising neighborhood pushback, slowing appetite to dole out state incentives or welcome the industry at all, and the small pool of lenders able to foot the huge bill. But development remains at historic levels, and most of the biggest projects breaking ground this year were data centers.

Easing power problems may get development moving faster. The Biden administration launched a task force in September to do just that, and Trump said he will push for an increase in fossil fuel generation and remove regulations and environmental hurdles that slow power production. Both political parties, and a bunch of major technology companies, also threw their support behind an increase in nuclear power. As part of that push, Constellation Energy is reopening part of the infamous Three Mile Island power plant after signing a deal with Microsoft in September.

CRE pros waited for them a lot longer than expected, but interest rate reductions finally came, first in September and then in November and December, for a total 100-basis-point drop. 

So far, cuts haven’t done much beyond making everyone feel better — though they certainly did that. And optimism is one of the primary ingredients of a CRE deal. 

Yet investment actually fell to a decade low in Q3, after cuts began. The current interest rate of 4.5% is still far above what the industry had gotten used to since the Global Financial Crisis, and borrowers with maturing loans are still feeling the pain. The 10-year Treasury, a benchmark for CRE loans, has moved up as the federal interest rate came down. Many assets are dealing with problems that go beyond the cost of debt, or the drops came too late to save them from serious delinquency. 

A lot will hinge on the broader macroeconomic picture next year and whether fears that inflation will edge back up under Trump’s tariffs materialize. When the Fed dropped rates Wednesday, it indicated it will slow the pace of reductions, so what CRE sees may be what CRE gets for a bit.

WeWork came out of bankruptcy on June 11 as a much leaner company and with a surprise new majority owner: proptech firm Yardi Systems. 

Yardi put up $337M of the $450M WeWork needed to exit bankruptcy and emerged with a 60% interest in the firm. WeWork’s largest lender, SoftBank, fell back to a 16.5% equity stake after years of pumping billions into the coworking company. 

The acquisition might have been a shock, but some said the buy makes sense considering that data and technology are becoming more intertwined with property.

WeWork shed more than half its locations and cut its rent roll by $12B as it renegotiated most of the leases it kept, a process that confused and frustrated members and landlords alike. Many office owners that lost locations struggled to backfill the space, and a spate of buildings moved into special servicing or were foreclosed on after WeWork stopped paying rent. 

Other coworking companies swooped in to take some of WeWork’s best spaces, and coworking writ large is still posting double-digit growth despite the near-demise of its poster child. 

WeWork, now helmed by former Cushman & Wakefield exec John Santora. The firm announced a membership partnership with Vast Coworking in October that was its first move toward growth post-bankruptcy.

One last thing: WeWork co-founder Adam Neumann made an aggressive attempt to buy back the firm he was ousted from. That didn’t work, but he kept busy with his new firm, Flow, buying up apartment and office buildings and even launching a competing coworking company.

The National Association of Realtors, RealPage, hotels — antitrust and price-fixing probes were all the rage in 2024. 

The DOJ launched a now-dropped criminal probe into RealPage and multiple multifamily landlords in April and opened up an antitrust suit against RealPage in August for allegedly price-fixing rents by compiling and sharing proprietary multifamily rental information. The case followed a class-action lawsuit by renters against the software firm that began late last year.

The investigations, a pet cause of the Biden administration, continue, and the ramifications are rippling through the country. San Francisco and Philadelphia banned algorithmic rent-setting software. Multifamily landlords have shifted away from using revenue management software and are being extra sensitive about only using publicly available data. RealPage filed a motion early this month to get the DOJ antitrust suit dismissed. 

Hotel operators also came under scrutiny with price-fixing lawsuits this year. Hilton, Hyatt, InterContinental Hotels, Marriott and others were caught up in a February lawsuit alleging they used a shared database by CoStar subsidiary STR to artificially inflate prices of luxury hotel rooms. A similar lawsuit was filed in April, this time naming hospitality revenue system IDeaS alongside major hotel chains. Yet another price-fixing case against Atlantic City casino-hotel operators, including Caesars Entertainment and MGM Resorts, was dismissed by a federal judge in October.

A much-watched lawsuit by homebuyers over NAR’s commissions model ended this year as America’s largest trade association agreed to a $418M settlement and changed its commission structure. The organization was accused of conspiring to inflate commissions to be among the highest in the world, requiring buyers and sellers to unnecessarily use brokers and steering buyers away from properties that offered lower broker fees. The case was world-altering for residential brokers, but CRE largely shrugged it off. 

NAR is still dealing with multiple lawsuits alleging forced membership and discrimination against minorities, a lawsuit by Zillow accusing it of monopolistic behavior, and it is trying to get the Supreme Court to prevent the DOJ from reopening its own antitrust case against the association. It’s also still working through the repercussions of last year’s accusations of sexual harassment against then-president Kenny Parcell. In January, Parcell’s successor abruptly resigned, saying she was being blackmailed.

Why yes, the world’s largest IPO this year was a cold storage REIT. Lineage raised $4.4B when it went public in July, underscoring just how hot refrigerated warehousing is these days. 

The sector is expected to nearly triple by 2031 as supply chains get revamped, shifting climates impact food systems, and services like Hello Fresh and same-day grocery delivery alter consumer demand. Cold storage has just a 3.4% vacancy rate despite much of its supply being outdated, opening up opportunities for development.

Lineage’s shares sold for $78 apiece then but have since fallen down to just under $61. The 12-year-old firm is the largest cold storage warehouse owner globally, with an 84M SF portfolio across North America and Europe. 

The collapse of Steward Health left not just the hospital operator but its private equity landlord ensnared in turmoil — and caught the attention of legislators and criminal investigators. 

Steward Health, the largest privately owned hospital system in the U.S., filed for bankruptcy in May, putting a chunk of its 32 hospitals in eight states at risk of closing. It was the main tenant of Medical Properties Trust, the country’s largest healthcare landlord, and the two companies had an entangled relationship. MPT, which loaned Steward money to stave off bankruptcy, went on to put up millions in debtor-in-possession financing to keep Steward’s facilities operational through the proceedings.

MPT has been dealing with its own financial strain, including taking more than $1B in writedowns through the year related to Steward’s unpaid rents and loans.

Steward blamed high costs and “insufficient reimbursement” from the government for its bankruptcy, but others pointed the finger at MPT and the private equity model in healthcare for charging unfairly high rents. Other MPT tenants ran into similar issues after doing sale-leasebacks with the REIT and were likewise loaned money by the firm when they ran into financial difficulties. The end result was often hospital closures.

U.S. senators, led by Elizabeth Warren, have called MPT a Ponzi scheme and asked the IRS to increase its scrutiny on healthcare REITs, accusing them of “meddling in the operations of their tenants.” Along the same lines, Steward filed a lawsuit against MPT, claiming that it obstructed Steward from doing deals.

Meanwhile, Steward execs have been accused of mismanagement, embezzlement, fraud and corruption, and a federal criminal probe is ongoing. Its CEO, Ralph de la Torre, was summoned before a Senate panel in September about Steward’s management practices and executive compensation but failed to appear and announced his resignation the same day. The Senate asked the DOJ to pursue criminal contempt charges against him, the first time it pursued such charges since 1971.

Steward is still working through its bankruptcy. It has sold or handed over operations of some hospitals while closing others and said its remaining portfolio will likely face a similar split.

It was expected, but still painful: 2024 was the year of the default.

That was particularly true of office, but owners across asset classes found themselves topsy-turvy as higher-for-longer interest rates upended pro formas and pushed the total of delinquent loans up 25% in the first three quarters of the year.

Plummeting values — often leaving office buildings worth less than half their previous appraisals — knocked properties out of debt-service coverage ratios or triggered material adverse effect clauses. Owners resorted to deeply discounted or short sales, dealt with foreclosures or simply gave up and handed over the keys. 

No one was safe. Defaults at the highest-rated tranches of debt and previously ultrasafe single asset, single-borrower bonds rose steeply this year.

2024 also brought a fresh hell: the rise of the double default. Though banks started taking more writedowns from their CRE loans and increasing their reserves this year, extend-and-pretend was alive and well. But borrowers defaulting again after modifying nonperforming loans nearly doubled this year, and there were $5.5B of loans at risk of redefault at the end of Q3. 

The Federal Reserve said in October that CRE kicking the can down the road put the entire financial system at risk. Roughly $400B is maturing soon, representing about 27% of bank capital. CRE loans nearly took down New York Community Bancorp until it got a $1B cash infusion in March.

The big question now is if the worst is over, and signs are split on that. Foreclosures are rising, typically an indication that a market reset is around the corner. But distress is still hitting new highs, and renegotiating terms has pushed the long-discussed wall of maturities into 2025. Multifamily maturities are expected to hit a new peak, $5.4B, next fall. Until those start being worked through in a meaningful way, CRE won’t be able to breathe easily.

U.S. life sciences real estate is drowning. Nearly one-third of lab space is vacant, and that number is expected to rise. Chicago leads the way at 50% empty as it prepares to double its supply in three years and has logged zero new leasing activity in two quarters. 

If the current pace of absorption continues, it would take 20 years to work through the national supply glut. Rents are down nearly double-digits from two years ago.

The weakness has been a drag on construction lending behemoth Bank OZK, which had to write down a couple of life sciences projects it funded. That includes highly anticipated megadevelopments like IQHQ’s $1.6B Research and Development District in San Diego, which has delivered but not signed any life sciences tenants, and Sterling Bay’s Lincoln Yards in Chicago.

There is some good news, with venture capital funding picking back up for life sciences companies. But that isn’t likely to translate to much real estate activity: The money is mostly going to larger, established firms that don’t need to physically expand, while smaller startups are being more conservative and staying in incubator space longer. And lab tenants across the board are choosing smaller spaces these days.

Federal prosecutors stepped up their efforts to root out fraud this year, and that was reflected in CRE.

Apartment renter fraud is spiking, and mortgage fraud is so pervasive, it’s impacting Fannie Mae’s balance sheet. Freddie Mac rolled out new policies in April, including broader audits and more required documentation, and one or both of the government-sponsored enterprises stopped accepting new loans worked on by BBG, Riverside Abstract, Madison Title, Sevenstone Capital or Eastern Union. On the other hand, Freddie lifted its blacklist on Meridian Capital Group in October but with new guardrails in place.

JLL also fell victim to multifamily loan fraud, resulting in an $18M loss to the brokerage in Q2.

In other notable fraud news, Nightingale CEO Elie Schwartz was charged with wire fraud by the DOJ in December, the first criminal charge over the millions of dollars of CrowdStreet money that went missing in 2022 and 2023.

The increase in fraud allegations is partially a cyclical thing — criminals take advantage of frothy boom markets to fudge numbers or avoid strict due diligence, and it comes to light when the market turns, scrutiny picks back up and suddenly things aren’t penciling out. 

Two years of negotiations to blend Kroger and Albertsons imploded spectacularly in December, with Albertsons suing Kroger. The $25B merger got hung up over regulators’ antitrust concerns, and the chains lined up a deal to sell 579 stores to appease the government, which never came to fruition. But on Dec. 10, a federal judge put a temporary injunction on the merger, agreeing with the FTC that the combined company would reduce competition in the grocery space too much. 

The next day, Albertsons filed a lawsuit against Kroger asking for billions of dollars in damages and accusing Kroger of not making enough concessions to gain approval, instead acting in its own self-interest.

Kroger and Albertsons had said they needed to merge to compete with Walmart, which is the undisputed grocery leader and is still growing, particularly in online sales. It spent 2024 remodeling more than 600 stores, including converting some to Supercenters with grocery sections and opening its first new locations in three years.

It is the one thing just about everyone can agree on: Housing affordability is a problem. 

The rising cost of shelter was a major contributor to inflation this year and a big reason interest rates stayed so high for so long. That focus pushed housing into the spotlight in the U.S. presidential election. Renters and property owners alike see this bipartisan moment as a possible turning point in solving a crisis that has been brewing for decades but reached a fever pitch after the pandemic sent prices soaring across the U.S.

CRE said the problem is supply — developers need to be free to build more cheaply and more easily to keep costs low for renters. And this year saw record new supply in the form of a 50-year high, largely driven by major oversupply in the Sun Belt, which pushed rents down at the steepest rate in five years. 

But the worm is already turning. Occupancy rose in Q3 for the first time in two years and rent growth turned positive again in pockets, though there was no real dent in the affordability crisis. And now, development is falling off a cliff.

Through it all, the largest multifamily owners performed well, getting creative with concessions and still seeing their revenues rise above expectations.

Who woulda thunk it a few years ago: Retail was a bright spot in 2024.

There were dark clouds for sure, including a spike in store closures that could worsen in early 2025. But the sector’s slog through hell the last decade weeded out the weak, and investors are taking notice of its newfound stability. 

Consumer spending is high and that’s expected to be capped by a record holiday shopping season. Leasing hit a five-year peak over the summer and then slowed down, but that’s mostly because vacancy reached a decades-low, making it difficult for retailers to find space. Almost every major retail bankruptcy this year  — including Red Lobster, which came in and out of bankruptcy within four months — was met by hand waves that backfilling would take no time and new tenants would come in at higher rents. Construction remains at a historic low. 

Hines is among the companies looking to capitalize on the recovery. Investment sales have already started to edge up and are expected to take off next year.