Fed’s signal of cutting interest rates will unlock some CRE deal activity
(Commercial real estate investment volume was down 42% year over year in 2023.TADAMICHI VIA GETTY IMAGES)
Deal volume was largely frozen in 2023 across all asset classes, but some analysts are predicting a thaw may occur in 2024 — even if only slightly.
By the numbers: Investment volume was down 42% in 2023 from the prior year, according to CBRE Group Inc., which is predicting transactions to be down again in 2024 but by a more modest 5% year over year.
Two levers economists and investors are watching are what the Federal Reserve does with interest rates next year and the 10-year Treasury yield. But many are quick to note there remain a number of other factors weighing on deal activity, including pricing expectations between buyers and sellers.
Rebecca Rockey, deputy chief economist and global head of forecasting at Cushman & Wakefield plc, told me the Fed’s signal earlier this month to cut interest rates next year was anticipated, but there remains uncertainty about inflation, which means there is no guaranteed path for the federal funds rate.
“I think there is a temptation to place too much emphasis on the Fed pause and pivot,” Rockey said. “Certainly, it will add much needed clarity, but the fact remains that we are in the midst of a broader adjustment process to higher costs of capital, and that will persist well after the Fed’s pivot and throughout their cutting cycle.”
Read More, go to: