WHY INVESTORS EXPECT CRE TRANSACTIONS TO REVIVE IN 2024
The Federal Reserve Kept Rates Flat
- The Fed kept the overnight rate in the 5.25% – 5.5% range, but they left door open to cuts later this year; Rate cuts would signal reduced inflation and increasing economic stability
- Multiple rate cuts in 2024 could cause lenders to reduce their lending spreads, in turn reducing the cost of CRE debt capital
Lenders Could Begin to Loosen Standards and Increase LTV’s
- As lender confidence in the downward trajectory of interest rates gains momentum, they may begin to loosen their standards
- Lenders have tightened their standards for 6 straight quarters
- Loosening lending standards could facilitate increased investor leverage
Investors Plan to Get Active Sooner, Rather Than Later
- Lower interest rates would help unlock the near record level of dry powder waiting to transact in commercial real estate
- Many large private investors may try to move forward before the institutional capital fully engages
*Through 4Q 2023
Sources: Marcus & Millichap Research Services, Senior Loan Officer Opinion Survey
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