18 Jun 2024
17 min read

Real Estate Pulse - Q2 2024

Building Construction

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Excess Supply Delaying CRE Upturn

The lagging investment performance of property is clearly apparent in the first quarter report for the unlevered NCREIF index. Despite solid economic growth and stronger than expected employment, first-quarter NCREIF data shows continuing deterioration in unlevered property total return, but, at a significantly more subdued rate versus Q4 2023. For the four quarters ending in March, NCREIF total return clocked -7.2%, with the appreciation component at -11.2% and the income component at 4.4%.

Additional highlights

  • The US economy posted a solid 1.6% real GDP growth rate in Q1 2024 after the surprisingly strong 3.4% beginning and 4.9% postings for the prior two quarters, respectively.
  • The volume of US property transactions continued to contract on a year-over-year basis in Q1 2024, down 16% from Q1 2023.
  • Transactions prices reported in the Real Capital Analytics CPPI offered some better first quarter news. Industrial property prices rose 2.2% and retail property inched up slightly.
  • In contrast, apartment and office property suffered further price declines but at a less serious pace than in prior quarters. Overall, property prices outside of the six major metros (NY, LA, SF, DC, Chicago, Boston) were flat.
  • Vacancy rates rose year-over-year in most of the top 50 metros for apartment, industrial and office properties while retail properties showed improvements across roughly half of the top 50.
  • Similarly, rents fell on a year-over-year basis in the majority of industrial, office and retail markets but in roughly half of apartment markets.

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