Clarion Partners, a leading global real estate investment manager, shared its thoughts on the US economy and outlook for real estate in 2024. It notes that the economy has stayed resilient despite headwinds from inflation, higher interest rates, and geopolitical risks.
The expansion has been sustained by a robust jobs market, steady consumer spending, and fiscal deficits. There could be some relief with inflation moderating which could lead the Fed to pivot its policy in 2024 and provide relief to rate-sensitive parts of the economy like real estate.
Real estate activity has slowed due to higher interest rates, while sellers have been unwilling to lower prices. In some segments, there is concern about a wave of maturities which will have to be refinanced at higher rates in a more restrictive environment.
The firm is generally optimistic about commercial real estate except for office, mall, and select retail. Other than these areas, vacancy rates remain low, and rents remain elevated. There has also been a drop in new construction which is also supportive of rents continuing to grow in the coming years. It also believes that private real estate is well-positioned to take advantage of dislocations created by the current market environment.
Finsum: Clarion Partners, a real estate invesment manager, believes that macro conditions for real estate will improve in 2024 due to a more dovish Fed while underlying fundamentals remain solid.