Commercial Real Estate Outlook for 2024:

Slow and Steady Wins the Race

By Mark Ellinghouse

The classic fable of The Tortoise and the Hare is well-known across mainstream culture. Yet despite the story’s reliable and surprisingly universal thesis, it appears to have become commonplace for investors to look for faster and bigger results in lieu of slow and steady returns. And with recent high rates of return triggered by sustained low interest rates and pent up demand following the Great Recession, the commercial real estate sector seems to be no exception to this hare-like approach. It should therefore come as little surprise that, given high interest rates, increased construction costs, and political turmoil, many commentators on the 2024 commercial real estate market predict negative results for the upcoming year.[1]

Upon review of the data and logic supporting these conclusions, as well as a myriad of market data, I posit that these predictions improperly frame expectations for commercial real estate in 2024. While investors may not be printing money quite like the post-pandemic economic surge, significant activity is expected across industry segments that should give confidence to investors. Even if interest rates are not reduced as some have expected, good returns should be achievable for those who have reasonable expectations for the road ahead.

Take the industrial and housing market sectors. Though historic levels of growth are not predicted for these segments quite like years past, it is difficult to conclude that any of us will stop ordering so many Amazon packages or that the ongoing housing crisis has been solved. As a result, projects will continue to be greenlit in these areas as developers adjust to higher interest rates and normalized construction costs. According to a recent ULI survey, the industrial and housing segments have the highest prospects for both investment and development in 2024.[2]

Negative narratives have likely gone too far for the office segment as well.[3] Commentators often point to low levels of occupancy which have persisted after the pandemic, but recent studies have shown that (1) employees are 31% more likely to be promoted when working in the office as opposed to remotely, and (2) remote employees are subject to much higher rates of turnover than in-office employees.[4] Both employers and employees will adjust to these long-term effects of hybrid work schedules, and I expect this will result in a resumption of higher office occupancy levels. I too love a day working from my couch in my pajamas, but my team and I both benefit when we can collaborate in person (and dressed for success). Commercial real estate is cyclical, so the office market should rebound just as the retail market did after the pandemic.

Given recent political developments, it is hard to make a market prediction with any reasonable certainty. If a greater conflict explodes in the Middle East or elsewhere, market demands could shift in ways that are impossible to forecast. Yet given current conditions, I urge readers to resist the clickbait of negativity and any expectation of hare-like returns, as the tortoise’s preference for steady, sustained returns should result in long-term success across the commercial real estate market.





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Meet the Author: Mark Ellinghouse
Mark Ellinghouse 916-558-6091

I assist clients with commercial real estate matters, including buying, selling, leasing, and management of real property. I also help clients structure investments in real estate, handling projects relating to financing, investment, and joint ventures.

In addition, I regularly advise clients on general corporate matters, from formation and management to operating issues to third party contracts for licensing, research and development. I have a diverse background, with experience in private practice and in-house counsel, on both litigation and transactional cases, and in non-legal roles. I like working with sophisticated clients who demand top notch legal advice to help them manage their legal issues in an efficient and effective manner.

I look forward to working and/or connecting with you soon. 
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