Look Deeply into the Crystal Ball: A Forecast of 2024 in Commercial Real Estate
If you are reading this, that means you have most likely put away all of your holiday decorations, started a new year’s resolution, finished traveling, and are ready to figure out what 2024 will bring for the commercial real estate business. You have come to the right place!
First, let’s start from where we came from. Did you survive THE GREAT RECESSION OF 2023? Well, I predicted (at least to my clients or anyone that would listen) that it wasn’t going to happen. There were way too many green indicator arrows pointing up in most sectors for us to have a meaningful downturn. Plus, J Powell and his crew actually did a decent job with their interest rate hikes and the ‘soft landing’ they were shooting for.
Now, on to 2024. Given the fact that we were in THE GREAT RECESSION OF 2023, commercial lenders stopped lending. As a matter of fact, many of our clients said that it was harder to borrow money last year than it was in the great recession of 2008 -2010. A quote from this article sums it up nicely https://www.wsj.com/real-estate/commercial/the-money-has-stopped-flowing-in-commercial-real-estate-43c003d3.
“But many lenders also have lost their appetite for new deal making. This is particularly true for small and regional banks that have been wary of commercial property ever since the failures of Silicon Valley Bank, Signature Bank and First Republic.”
This affected everything. Purchases, new construction, refinancing, etc. And, like the single-family home market, if you have a 3% mortgage and you are thinking about trading to a new home, it’s pretty hard to sell and step into a 7% mortgage, so you stay put. Lot’s of similarities in the CRE market and there is a pent up demand.
Plus, private equity is ready to jump into the mix with $300B that has been sitting on the sidelines waiting for the smoke to clear: https://www.costar.com/article/894318845/private-equity-funds-flush-with-300-billion-stand-ready-to-pounce-as-recession-fears-fade
Long story short, with the freezing of interest rate hikes, we should start to see things moving again and all market sectors.
The one market sector that is in a very interesting segment to watch is the one my company focuses on – retail. It’s really tough to pencil new retail developments when you are competing with single family housing, multi family housing, and industrial which are willing to match or beat any pricing that retail can offer (except for street front end user pad pricing), when those other products can get entitled and close faster than retail.
My plight to master plan developers and city planners – please carve out meaningful areas for retail, and don’t let this be an afterthought. Well thought out retail increases neighborhood home prices and adds jobs to that community: https://www.atlanticbay.com/knowledge-center/what-nearby-features-may-increase-your-homes-market-value/
Office is also an interesting segment to watch. People keep trying to kill office and say it’ll all be remote workspace. That’s not going to happen as companies are flexing their muscles and enforcing at least some sort of flex home/in-office programs. However, if an office product is obsolete or in the wrong area of town, massive headwinds for those properties for sure.
Here’s a quick roundup of some of the bigger projects to look forward in Sin City this year.
Las Vegas came off a bonkers year in 2023 with the additions of not one, but two new casino resorts opening (Fontainebleau and Durango Station), as well as hosting our first F1 race in over 40 years, and let’s not forget the opening of that gigantic LED globe/concert venue, the Sphere.
This year won’t be quite as exciting, but let’s look at some of the big stories that will be talked about in 2024 in Las Vegas:
After a long battle with the NFL not allowing any advertisers to mention Las Vegas during their telecast (because LV allowed LEGAL sports betting https://lasvegassun.com/news/2003/jan/14/nfl-wont-allow-vegas-ads/ ), Las Vegas gets to host it’s first Superbowl! Oh, and in case you were wondering what changed, the NFL now actually has tri-exclusive ‘official’ sports betting partners: https://www.nfl.com/news/nfl-announces-tri-exclusive-sports-betting-partners Nice...
Housing market – Inventory down, prices up, and lots more Californians on the way! Zillow rates Sin City as the 12th hottest housing market in the country this year: https://www.reviewjournal.com/business/housing/how-hot-is-the-las-vegas-real-estate-market-this-year-2982023/
Out with a volcano, in with a guitar! The Mirage becomes Hard Rock, and gets a giant new guitar tower in the process.
Tillman Fertitta should begin construction with a new 43 story hotel casino on the corner of Harmon and Las Vegas Blvd.
Hard Rock
The Attari
The Dream
There are also a couple of hotel/casinos that ‘may’ happen that we can keep our eyes out for. The Atari, the Dream, and The Casino Royale are all looking for financing to get things moving. We’ll see what happens once the capital markets come back.
No other huge news in our city for this year, other than the usual amount of hosting a Las Vegas version most every major event, concert, and conference.