2024 Emerging Trends Report from ULI and PwC

In their annual joint publication, the Urban Land Institute and Price Waterhouse Cooper released their expectations for the 2024 U.S. real estate market and other long-term economic drivers. Commercial real estate was a primary focus. See below for our takeaways or click the button to download the report PDF.

Click Here to Download ULI/PwC Report

CQG Takeaways

  • Despite an expectation for higher-for-longer rates, investors are eager to acquire new assets. Sellers have not yet fully adjusted their expectations to current market conditions. Economic expectations call for a growth recession with risks weighted firmly to the downside.
  • Large amounts of debt are coming due and must be refinanced. 40% of the $4 trillion of outstanding CRE mortgages will mature over the next two years. Much of this debt will need to be refinanced at higher rates unless lenders agree to “extend and pretend,” postponing obligations until conditions are more favorable. Ultimately, tighter underwriting and costs will limit credit availability.
  • Firms want to set up shop in the newest, safest, healthiest buildings with the top amenities and best locations. “Close to 90 percent of the office absorption is in the top 10 percent of the stock.” There is therefore a large disparity between Class A and Class B office space.
  • Eco-anxiety remains a concern as natural disasters and heat waves add costs to RE investments. Meanwhile insurance costs are rising, particularly for smaller companies.
  • Housing affordability remains a large concern, particularly among rising construction costs of labor, materials, and land.
  • CRE investors are shifting their “core” portfolios from downtown offices and regional malls to alternatives like data centers, student housing, medical offices, indsutrial cold storage, and self-storage.
  • Remote work is the new normal and may be the single most important trend for property market dynamics in generations. CRE developers must adjust their designs for the hybrid-working generation, and downtowns need to reinvent themselves.
  • Multifamily is oversupplied in some cities, but homebuilding prospects remain strong in the sunbelt cities as people continue to move south, bolstering long-term demand drivers.