Commercial real estate investing demands real-world data, not gut feelings. Brokers must combine extensive research, market knowledge and experience to match clients with the best available properties.
As we begin 2024, Commercial One Brokers is watching a number of opportunities and challenges for CRE investors, owners and tenants in the commercial real estate market, focusing on the latest real estate predictions for 2024. While high interest rates have put downward pressure on transactions, some costs may begin to ease in the year ahead, offering new opportunities in commercial real estate investments.
With over 60 years of combined experience, we make it a point to provide the most accurate and up-to-date commercial real estate market analysis available to our clients. Our in-depth industry knowledge, as well as long-established relationships within the Branson, Missouri community, enable us to provide the best brokerage service in our area for top real estate markets.
Here are some of the trends we’re watching as the year unfolds.
#1: Credit Availability
According to a recent Global Real Estate Outlook Survey from Deloitte, real estate owners and investors remain concerned about rising interest rates and the cost of capital. The survey includes respondents from North America, Europe and Asia/Pacific, with results shaping the real estate forecast for 2024.
With central banks raising interest rates to address inflation, investors have contended with tighter lending standards over the past two years. Global property sales decreased in 2023, and industry insiders expect continued challenges for CRE purchases in 2024. Higher borrowing costs also make refinancing more difficult. About half of respondents expect a continued increase in the cost of capital and a decrease in capital availability.
With investors becoming more selective when choosing properties, a growing interest in undervalued and newer assets has emerged. Recent and anticipated price declines in some building categories may open up acquisition opportunities for newer investors.
#2: Office & Workplace Trends
Ongoing remote and hybrid workplace models continue to exert pressure on demand for office space. The United States alone has lost over 200 million square feet in the office category since 2020, and vacancies are up in markets around the world.
Branson, Missouri, which has largely bucked the work-from-home trend, remains highly competitive. Office buildings enjoyed an overall occupancy of 94% in 2022, with occupancies clocking in at 95%, 93% for Class A, Class B and 98% for Class C buildings, respectively. This trend is significant in understanding the commercial property value dynamics in 2024.
Newer, high quality office buildings have also shown resilience in the face of economic headwinds. Investors are showing interest in modernized properties designed to accommodate hybrid work arrangements. Other sought-after characteristics include health and safety features, employee-friendly amenities and desirable locations.
#3: Retail Demand
Retail properties are showing signs of strength after a period of declines in consumer sentiment. The Branson market finished 2023 with a 95.5% occupancy rate, up from 92% in 2022. Results included an 99% occupancy rate for Highway 76, 96% for the Branson Landing district and a very tight 99% for the historic downtown area. This resilience is a key factor in the real estate market analysis, highlighting the potential for retail commercial real estate investments and rent increases.
Factors driving retail tenant demand include industry transformations and larger retailers consolidating in high-quality locations. In fact, store openings outpaced closings in the United States in both 2022 and 2023.
Increasingly, retailers are investing in omnichannel logistics to serve online and brick-and-mortar shoppers. Many physical stores have upgraded their onsite digital capabilities, along with more efficient last-mile distribution. Landlords remain optimistic about continued demand, rent increases and a favorable balance of supply and demand.
#4: Industrial Space
Markets around the world are seeing sustained demand for industrial space. This is significant for investors focusing on commercial real estate market opportunities in 2024.
In Branson, vacancy stood at less than 5% by the end of 2023. Inventory remains extremely tight for those looking for warehouse space, climate controlled warehouses and office-warehouse spaces. Much of the available inventory lacks the required ceiling heights and loading docks that many occupants require. Suitable land for building industrial space is also in short supply.
Industrial construction has grown in Southwest Missouri in recent years, echoing a trend in other regions. Factors driving demand for industrial space include e-commerce, third-party logistics providers and reshoring investments. With governments incentivizing new construction to address supply chain issues, more growth is expected in the near term.
Potential challenges for the industrial sector include limited mega-sites on which to build large facilities and access to energy infrastructure.
#5: Building Sustainability
A full 60% of respondents to the Deloitte survey say firms are not prepared to meet environmental, social and governance standards. Another area of growing concern is increased property insurance costs and limited coverage options in risk-prone areas including California and Florida.
With 2023 registering as one of the hottest years on record, and an increase in billion-dollar weather events, quality construction and sustainability are high on the wish list for commercial properties. Investors, owners and prospective tenants are seeking out properties that contain energy efficient materials and electrical systems, impacting the commercial property value. Indoor air quality and weather resilience are other top priorities, according to a report from PricewaterhouseCoopers.
#6: Impact of AI Technology
Two-thirds of industry professionals say much of the industry’s technology still relies on legacy systems. Digital upgrades including artificial intelligence provide many opportunities for the CRE industry, offering more informed commercial real estate investments and business decisions.
AI-enhanced technology has a number of possible applications for commercial real estate:
- Deliver more efficient property search and analysis
- Analyze investment opportunities
- Boost the customer experience
- Streamline research into prospective properties
- Improve fraud detection
Because AI remains a fairly new development, CRE firms and investors are advised to research its potential in order to use the technology responsibly.
#7: Economic Trends
Positive events in 2023 included a proactive response to banking turmoil early in the year, ongoing consumer demand and stabilized energy and food prices.
However, most CRE professionals expect revenue to decline in 2024, according to the Deloitte survey. That includes 60% in North America, 66% in Europe and 53% in Asia/Pacific. Most plan to reduce expenses in response to higher costs of recent years.
Respondents named a number of headwinds facing the commercial real estate forecast in 2024, including tight monetary policy, extreme weather events, increased migration across the globe and the ongoing war in Ukraine.
Trusted CRE Brokerage Services in Branson, MO
Commercial One Brokers has the experience, in-depth local knowledge and community connections to provide the service you need in today’s commercial real estate environment. We perform the due diligence necessary to identify the best properties for your needs, so you can perform your search and reach a decision in less time.
If you’re looking to buy, lease or invest in commercial property in the Branson, MO area, give us a call at 417-334-3149. You may also contact us online to learn more.
