Recently, the Federal Reserve decided to keep the Fed Funds Rate at its current rate which will continue to require patience, especially from those working in the CRE market. Despite any change in the Fed Funds Rate, recent transactions are showing signs of hope for commercial real esate with the YoY transaction decline now only at -8.0% in Q1 2024 as compared to -18.4% in Q4 2023 according to Moody’s Analytics. This graph illustrates the YoY CRE Sale Growth by property type over recent years showing positive upward movement.
According to Moody’s Analytics, the recent increase in transactions larger than $50 million has kept total transactions afloat. The YoY growth rate for transactions over $50 million has risen significantly over the last year. Recent large real estate purchases such as a $963 million retail property in NYC by the luxury goods company Kering and retail center purchase of $700 million by UCLA that will become a research facility have had a great impact on the YoY growth rate for transactions. This graph illustrates YoY CRE Sale Growth by sale size.
Despite high interest rates in the current market, investors are still hungry and willing to invest in commercial real estate, mainly in large projects. Many investors are willing to take the risk to invest in such large projects despite current interest rates. However, in order to see significant transaction volume growth, the Fed will need to start decreasing interest rates. Banks are still operating with strict lending standards, but the number of banks doing so is at the lowest it’s been in the last two years. The challenges are still present in the commercial real estate industry, but signs of recovery are emerging.
Kommentare