Commercial Real Estate Challenges 2024


As of August 2024, the federal funds rate remains between 5.25% and 5.50%, continuing the "higher-for-longer" scenario impacting the commercial real estate market. 📉 Refinancing is a major challenge, with property values dropping and office vacancies high. 📊 Transaction volumes fell 44% in 2023 and continue to decline in 2024. The pricing divide further complicates buyer-seller agreements. 🏢💼



As of August 2024, the federal funds rate is still hovering between 5.25% and 5.50%, maintaining the "higher-for-longer" interest rate scenario that continues to significantly influence the commercial real estate market. 📈

One of the biggest challenges currently is refinancing. With property values decreasing, in some cases by double-digit percentages from their peak, many borrowers are struggling to secure new loans that can cover their existing debt. 📉 This is especially true for sectors like office, where vacancy rates remain high. 🏢 The difficulty in refinancing is compounded by the fact that a large percentage of loans have characteristics that make them hard to pencil out. I personally anticipate that these challenges will persist, although perhaps not as drastically, in the coming years for all property types. 📊

High interest rates are not only affecting refinancing but also impacting transaction volumes. To drop some statistics, in 2023, the estimated total dollar volume of commercial real estate transactions fell 44% from 2022, and as of Q1 2024, it has been down somewhere between 17% and 27% from 2023. 📉

Though higher interest rates are holding things back, a pricing divide is also contributing, with buyers and sellers struggling to agree on valuations. 🤝



Do you own commercial real estate? Would you like a free consultation regarding your property? Schedule a time with me:

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