H1 2024

U.S. Commercial Real Estate 
Investing Outlook

A Window of Repriced Opportunities:
Market Signals Capitulation to Fed Policy

The investing world has shapeshifted after 11 interest rate hikes by the Federal Reserve to curb high inflation - a mission that, in Jerome Powell’s words, is still ongoing but “eased from its highs.”1 Although we haven’t seen another rate hike since July 2023, the residual effects are lingering, with strict lending standards, debt capital not nearly as readily available as before the rate hikes began, and commercial real estate (CRE) assets that are repricing and adapting to the post “free-money” era.

Figure 1: U.S. Federal Funds Effective Rate by YearFigure 14 (1)

However, the outlook for interest rates is improving, and we’re beginning to see its effects on the CRE market. Following the Fed’s latest guidance in December, the market has moved beyond the concept of further rate hikes and is now debating the timing and velocity of rate cuts.1 Although no one can predict the timing and impact of anticipated rate cuts, this pivot has helped remove a nearly two-year-long market headwind. Market behavior is changing and showing signs that there may be a window of opportunity before the descent.

Data from Green Street shows that CRE prices have declined, on average, by 22% since the Fed’s first rate hike in March of 2022.2 We have observed that the recent asset repricing has created opportunities for significant discounts in select pockets nationwide compared to their valuations prior to the interest rate hikes. Therefore, in H1 2024, we are looking for opportunities that are adequately discounted from their peak values, particularly in locations where market fundamentals remain intact, with an outlook that supports positive net absorption. For development deals, we are seeing certain opportunities that were previously stagnant now resurrecting in the face of improving debt terms and some alleviation in land cost premiums.

Figure 2: Green Street Commercial Property Price IndexFigure 14 (2)
Source: Commercial Property Price Index, Green Street, January 2024.

While we locate these projects, our rent growth assumptions based on market data and used in evaluating a business plan in H1 2024 will remain moderate, soft, and in some cases declining, keeping in line with CoStar Group’s latest data, which varies depending on the underlying market fundamentals, tenancy, and property type.3 Despite changing market sentiment and an improving outlook for interest rates, CRE transaction volume is still muted relative to its historical average.4 As a result, we expect CrowdStreet Marketplace deal volume to remain low in H1 2024 relative to our historical volume. However, we are cautiously optimistic that we may see some acceleration of market clearing activity later this year as markets further adapt to the changing environment. For those deals that do launch on our Marketplace, a discounted basis on acquisitions will be a commonly targeted theme for us.

As trends in this economic environment evolve, we closely monitor interest rates, inflation, and other economic indicators to keep you updated. Our H1 2024 report incorporates industry knowledge and thorough research to construct our outlook and opportunities across various CRE asset classes.

3 CoStar Group, Markets, Data Export, December 2023.
4 US Big Picture, MSCI Real Capital Analytics, November 2023.

Disclaimer: Investing in commercial real estate entails substantive risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. All investors should consider their individual factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. An investment in a private placement is highly speculative and involves a high degree of risk, including the risk of loss of the entire investment. Private placements are illiquid investments and are intended for investors who do not need a liquid investment.
CrowdStreet, Inc. (“CrowdStreet”) offers investment opportunities and financial services on its website. Advisory services are offered through CrowdStreet Advisors, LLC (“CrowdStreet Advisors”), a wholly-owned subsidiary of CrowdStreet and a federally registered investment adviser. CrowdStreet Advisors provides investment advisory services exclusively to privately managed accounts and private funds and does not otherwise provide investment advisory services to the CrowdStreet Marketplace or its users.

This article was written by an employee of CrowdStreet Advisors and the contents of this publication are for informational purposes only. Neither this publication nor the financial professionals who authored it are rendering financial, legal, tax or other professional advice or opinions on specific facts or matters, nor does the distribution of this publication to any person constitute an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet Advisors, its affiliates, or otherwise. The views and statements expressed are based upon the opinions of CrowdStreet Advisors. All information is from sources believed to be reliable. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance or success. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. CrowdStreet Advisors assumes no liability in connection with the use of this publication.

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