Real Estate Pulse - Q4 2024
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US CRE Producing Positive Returns
The combination of ongoing solid economic growth, moderating inflation and the first interest rate cut of the cycle largely explain the improvement in Commercial Real Estate (CRE) performance. Signals of a cycle bottom have been emerging since the beginning of 2024. More recently, roughly half of investors polled by CBRE are expecting a big improvement in transactions during the first half of 2025.
Additional highlights
- Investment performance for US CRE improved solidly in Q3 2024 according to updated NCREIF data. Total return for all properties on a cumulative basis was positive (0.83%) for the first time since mid-2022. Third quarter results showed shrinking negative capital appreciation compensated by ongoing solid income return.
- Among the eight sectors now contained in the Expanded National Property Index (NPI), only two report negative capital appreciation, office (-2.37%) and seniors housing (-0.44%).
- After seven quarters of shrinkage, property transactions improved during the second and third quarters of 2024. However, volumes remain well below the pre-COVID pace recorded in 2019.
- NCREIF capital appreciation reached positive territory in Q3 2024 for all the major sectors except office and the small seniors housing sector.
- Using transactions data, RCA reports that property prices slipped -0.6% in the third quarter. Separately, office pricing improved 0.2% and industrial pricing strengthened 1.3%.
- Third quarter data show fewer metros reporting rising apartment, industrial and office vacancy rates compared with the second quarter. However, industrial vacancy rates continued to tick up for almost all fifty top metros albeit slightly fewer versus the second quarter.
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