Commercial real estate has long been a pillar of our economy, with fortunes invested around the globe for shopping centers, commercial properties, office buildings, and more. JLL Capital Markets said, “Due to growing value and more favorable rates, buyers are assured of catching the bottom of the price decline and returning to the market.” With that said, a better year may be on the horizon for commercial real estate.

The Federal Reserve has already paused its interest rates since July, cutting rates as soon as the first quarter of this year. This could reduce the cost of borrowing capital and show a pick-up in the market.

According to the Seattle Times, that is actually what is happening. More clarity is coming to the surface for sellers and buyers, with more opportunities in the market than last year. They stated, “ With some central banks starting to signal that the rapid rate-hiking cycle is winding down, investors have gained more insight into borrowing costs. Several real estate deals — including the sale of roughly $33 billion in commercial property debt from the failed Signature Bank — have also provided more value transparency. The clarity is starting to spur some optimism in the beleaguered market.”

Looking at the value of commercial real estate through loans allows us to measure the health of the commercial real estate market. They are seeing more bids and more tours, which signifies early signs that commercial real estate is starting to settle more.  Now that rates appear to not be going up anymore, it's giving more hope when trying to close or get a loan. According to JLL Capital Markets, “ The U.S. could be a particularly interesting spot. Of the $3.1 trillion property assets with maturing debt through the end of 2025, more than three-quarters of that are concentrated in the U.S., specifically in the residential and office sectors, the brokerage said. Not only that, but we are seeing some more positive news for this year across the nation. The demand for retail property remains strong, where neighborhoods and strip centers are expected to have a steady performance, with rent growth among all types of retail space this year. 

There are glimmers of hope rising through the commercial real estate market, enticing folks to return to the market. New opportunities are rising again for sellers and buyers, and the banks have shown some more interest in borrowing costs, once again showcasing some good news for this year. With more people coming slowly back, we can expect to look for some more positive news throughout the year.

Samantha Minns
RWorld Content Writer
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Source: NAR, The Seattle Times