DLA Piper: Measured Optimism Among Commercial Real Estate Industry Leaders

(Image courtesy of DLA Piper; Breakout image courtesy of Josh Hild/pexels.com)

DLA Piper, London, released findings from its 2024 Global Real Estate State of the Market Survey, noting commercial real estate industry leaders are conveying measured optimism, after a few years of intense swings.

Among respondents, 63% are bearish, and 37% report being bullish on the commercial real estate market. That’s a significant change from the 2023 survey, when 86% were bearish, and 2022, when 75% were bullish.

DLA Piper points to stabilized interest rates, and the continued expectation that the Federal Reserve will cut rates this year, as partly driving the mentality.

Interest rates are understandably the largest driver of sentiment, but real estate leaders pointed to other external factors they believe will impact the commercial real estate market this year, including inflation (74%), the upcoming U.S. elections (73%), geopolitical conflicts (59%) and the availability of water and power (27%).

Internal factors affecting the space include the redesign of office and commercial spaces (64%), challenges in refinancing existing debt (96%) and labor constraints (44%).

In terms of asset classes, more respondents believe data centers are an attractive asset class, up more than 20 percentage points to 53% of respondents. Multifamily was at 43% and logistics/warehousing/cold storage was at 38%.

“After the stark highs and lows of the last two years, our 2024 survey provides evidence that many CRE leaders believe the market may be moving–or is at least poised to move–in a positive direction,” said John Sullivan, U.S. Chair of DLA Piper’s Real Estate Practice and Global Co-chair of the firm’s Real Estate Sector. “The stabilization of, and anticipated decrease in, interest rates were significant factors in the increased sense of optimism, and how the interest rate picture plays out over the balance of this year will no doubt have a material influence on the sector’s performance.”

The survey was conducted in February and March.