SitusAMC: Commercial Real Estate Values Stabilize; Investor Sentiment Improves

(Illustration: Stock photo. Thanks to Getty Images for making this image available on Unsplash)

The commercial real estate market appears to be stabilizing, with market participants seeing relief on the horizon as interest rates have started to decline, according to SitusAMC’s latest CRE Debt and Valuation Trends analysis.

SitusAMC said the gap between CRE property prices and value is narrowing amid improving investor sentiment. “Transaction activity is showing signs of improvement, with robust bidder pools suggesting a renewed interest in property types excluding office,” the report said. “The overall transaction market has stabilized, with early third-quarter data showing a 100-plus basis point improvement over second quarter.”

The report said industrial and apartment asset values have remained flat to slightly positive. For apartments, negative lease trade-outs have been a significant worry amid rising delinquencies and oversupply. But these lease trade-outs have narrowed and some have turned positive. “Seasonal effects may have influenced these positive signs, but the general sentiment is cautiously optimistic, with multifamily valuations projected to see slight positive growth in third-quarter 2024,” SitusAMC said.

Retail sector valuations are either holding steady or increasing, largely due to strong net operating income growth. Office valuations are still falling, but at a slower pace than in late 2023 and early 2024.

“Looking ahead, total return expectations for the quarter remain uncertain, with predictions suggesting a performance similar to last year’s figures,” the report said.