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Real Estate

U.S. Real Estate: Recovery Postponed but Not Cancelled

April 2024 – 11 min read

The U.S. commercial real estate market is approaching stabilization and recovery, supported by consensus that policy rate cuts will happen eventually, followed by lower debt costs. The Barings Real Estate team discusses how this backdrop is shaping opportunities across the asset class.

  • The first quarter of the year marked the seventh consecutive quarter of declining core real estate values, which are down 22.9% from the peak, according to the NFI-ODCE. That is the longest, deepest decline in the index value since the 2008-09 Global Financial Crisis.
  • While we make no pretense about getting the timing precisely right, the U.S. commercial real estate market is still approaching stabilization and recovery, supported by consensus that policy rate cuts will happen eventually, followed by lower debt costs.
  • Inflation continues to trend lower generally, but certain primary components of core CPI including the services and shelter components either reaccelerated or remained high.
  • Much could derail a prescribed path toward inflation and interest rate normalization—including armed conflicts around the world, ongoing geopolitical tensions, and uncertainty around the U.S. election.
Property Market
  • As of the first quarter of 2024, the distress build-up is slowing. MSCI RCA estimated that cumulative real estate debt distress across major property types reached $89 billion.
  • Transaction activity totaled $79 billion in the first quarter of 2024, a 16% decline year-over-year. All major property types experienced declining sales activity compared to the year prior.
  • Composite public REIT share prices are 24% below their prior peak with significant variation by property type. While the NFI-ODCE fund index value has fallen from the peak, the pace of capital value declines slowed over the quarter relative to the prior quarter.

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Dags Chen, CFA

Head of U.S. Real Estate Research & Strategy

Lincoln Janes, CFA


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