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Capital Markets Report | Q1 2024

At a glance, investment sales across all property types in Q1 2024 are down from last year. Deal volume climbed to $22.6 billion in January 2024, only to fall again to $13.7 billion in February. Price declines continue to moderate while debt origination is down more than 48% from Q1 2023 levels. The shift toward short-term mortgage extensions has postponed price corrections, stalling investment activity further. Despite this, there is an abundance of dry powder—unspent cash reserves waiting to be invested—among more opportunistic or value-add investment vehicles.


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Multifamily investment activity in the first three months of 2024 failed to keep pace with Q1 2023 sales. While subdued transactions can be attributed to the “wait-and-see” approach, the multifamily sector still led investment activity in February 2024 with $4.9 billion in transactions. An estimated $257 billion in multifamily loan maturities will come due this year, making up a large portion of the $4.7 trillion commercial real estate debt market. Additionally, multifamily mortgage delinquency rates rose again during the fourth quarter of 2023, and loss rates, which are on the rise, draw additional concern from investors.



Following a drop in transaction volume in 2023, when retail sales amounted to $53 billion (roughly 25% lower than the 10-year average), 2024 saw its weakest Q1 opening since 2013. Activity was boosted slightly by entity-level retail sales in January. An estimated $180 billion retail loans maturing between 2024 and 2026 adds another dimension for the market to consider.



Industrial sales cooled in the first quarter of 2024, after one of the hottest runs the sector has ever had. Roughly $10 billion in industrial assets traded hands in Q1 2024. While institutional buyers made the largest share of acquisitions (in dollar volume) in 2023, private capital remains active, fueled by new and existing investors looking to scale their portfolios. An estimated $156 billion in maturing industrial loans is expected to stimulate sales activity.



Though office transactions reached a 14-year low of $35 billion in 2023, the sector closed out its last quarter slightly above Q1 2023 transaction volume. The story so far in 2024 is owner-users overtaking private buyers as the primary buyers of office properties. With roughly $206 billion in office loan maturities this year (20% of total maturities), and another $180 billion in 2025 and 2026 combined, the sector remains in a difficult position. At 7.4%, office delinquency rates in Q1 2024 waver dangerously close to post-GFC levels of 10.5%. Office owners will have a harder time qualifying for extensions compared to other asset classes and may be forced to sell at a loss.



At the end of 2023, hospitality transaction volume decreased by over 50% year-over year. If the promised interest rate cuts ring true, transaction activity is expected to increase later this year alongside a narrowing of the bid-ask spread between buyers and sellers. The current bid-ask spread is roughly 10%, though institutional buyers are offering up to 20% from pricing guidance to gauge sellers’ motivation.


Outlook for 2024

According to RCA, an estimated $820 billion of commercial mortgages could come due in 2024, half of which were handed out by CMBS, CLO, and investor-driven lenders. Nearly 30% of the outstanding loan balance in 2024 comes from CMBS lenders, while banks are behind about 45% of the loans scheduled to mature from 2025 to 2027. Since property owners are not inclined to take the loss on the sale of an asset, and refinancing in a high interest rate environment is unlikely, many of these loans are deemed likely extensions.


What started as a glimmer of hope for capital markets at the start of 2024 has grown slightly in brightness at the close of Q1. Returning with mild optimism, some investors have started to deploy capital again. While opportunistic buyers have returned, an overwhelmingly large volume of loan maturities this year suggests a potential increase in transactional activities. Add in the looming promise of rate cuts and investors seem cautiously optimistic for the CRE market to return in the near term.

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