M id A tlantic Real Estate Journal — 2024 Forecast — January 2024 — 5A
www.marej.com
2024 F orecast
By David Zimmel, Zimmel Associates Navigating the Commercial Real Estate Landscape in 2024
A s we step into the new year, it’s essential to take stock of the evolv-
downsize their office spaces. This transition towards a more flexible work environ - ment is here to stay, and the office market will need to adapt accordingly. Retail Sector: A Mixed Bag Turning our attention to the retail sector, the out- look varies depending on location and business type. Overbuilding in some ar- eas may lead to vacancies, prompting property owners to consider alternative uses for their spaces. For example, Monmouth Mall plans to transform its structure into
apartments and an open- air mall. Retailers who can diversify their business of- ferings may fare better, but overall, the retail sector is expected to experience only a minor downturn in 2024, in my opinion. Inflation and Interest Rates: A Delicate Balance Inflation has been a signifi - cant concern in recent times. However, in the last six to eight months, it appears to have slowed down, aligning with the Federal Reserve’s objectives. Furthermore, in- terest rates have decreased
by as much as one percent- age point over the last three months. While we are un- likely to return to the histori- cally low interest rates of the past, I anticipate rates will continue to decline modestly. The new norm may settle around five and a half to six percent, which could drive decision-making among in- vestors and developers. In conclusion, the commer- cial real estate landscape in 2024 will see a significant shift in the industrial sector, with increased availability of larger properties and a
potential dip in rents. The of- fice sector will need to adapt to the changing dynamics of remote work, while the retail sector may experience minor setbacks but also opportuni- ties for redevelopment. Fi- nally, as inflation eases and interest rates remain favor- able, the commercial real es- tate industry must navigate this delicate balance to seize new opportunities and thrive in the evolving market. David Zimmel is president and co-founder of Zimmel Associates in Edison, New Jersey. MAREJ
ing dynamics in the com- mercial real estate indus- try and fore- cast what lies ahead. In this article, I’ll share my insights on the commer-
David Zimmel
cial real estate market in 2024, focusing on the industrial, of- fice, and retail sectors, as well as the impact of inflation and interest rates. Industrial Sector: A Shift in Supply and Demand Let’s begin with the indus- trial sector. Over the last twelve to 18 months, we’ve witnessed a notable surge in available industrial proper- ties, particularly those ex- ceeding 100,000 s/f. The pri- mary catalyst for this influx is twofold. First, land sales have proliferated, leading to a surge in construction projects. Second, third-party logistics companies, initially expanding to support giants like Amazon, now find themselves with surplus space. Amazon, in particular, is looking to return some leased space in certain areas across the country. However, it’s crucial to note that the sub-100,000 s/f in- dustrial spaces remain in high demand. This continued de- mand is driving rental prices, which, despite the increase in availability, have not dropped significantly. Nevertheless, I anticipate a slight dip in industrial rents throughout 2024, possibly up to 10%, as more space becomes available and tenants prioritize securing lower rents over holding out for higher rates. Office Sector: Adaptation is Key In the realm of office space, the landscape remains chal- lenging. While prime A-grade buildings are likely to main- tain their resilience, the B to C-grade buildings may face difficulties. Companies are reevaluating their of- fice space needs, with many opting for reduced office us - age, favoring flexible work arrangements and remote work. As the trend of employ- ees working in-office three days a week instead of five continues, companies may
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