To help you understand what is going on in the commercial real estate sector and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
Let’s check in on commercial real estate. This year, 2024, promises to be a mixed year. Sectors like office space are in for more pain, but the picture isn’t so dark elsewhere, and a few segments will thrive. The office market hasn’t seen the worst yet.
Office Space
Vacancy rates are set to go even higher, which is sobering, considering that the national rate just hit an all-time high of 19.6% in the fourth quarter. Look for vacancies to peak at nearly 21% later this year as demand for space stays subdued.
While more office workers are returning, many continue to work hybrid schedules, a couple of days in the office and a few days at home. So, employers need less space overall, even if their workforces are coming back to the office. Hybrid schedules mean fewer workstations are needed since workers rotate and share common spaces. And, in some metro areas, such as Boston, Houston, Miami, San Francisco and Washington, D.C., the fraction of the remote workforce isn’t falling much.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
So, 2024 will be the year of fire sales on offices. Deep-pocketed private equity funds hold $100 billion to snap up distressed office buildings in big metros like Los Angeles and New York. Meanwhile, office construction and rents figure to both remain stagnant.
Retail Space
Retail space is in for a better year than offices. The surprising resilience of the American consumer supported a big jump in retail construction last year. Building will slow this year, with most new space in suburban shopping centers. Aside from traditional malls, most retail space should hold up, with rents on the rise.
Industrial Space
The formerly hot industrial and logistics sector will cool but won’t freeze up. The burst of demand for warehouses and related space unleashed by the pandemic, when e-commerce surged, is leveling off now. Construction figures to slow notably, as the overall economy downshifts. But rent should still manage 2% growth in 2024.
Data Centers
Demand for data centers should stay hot, exceeding supply and lifting rents. In fact, the rise of artificial intelligence, high-frequency trading and other applications that use massive amounts of data will keep demand for data centers strong for years.
Construction will top 2023’s lofty level, prompting more conflicts with neighborhoods that resent the noise data centers make. Omaha, Nebraska, plus Austin and San Antonio, Texas, figure to be hot markets, given strong local demand and generous tax incentives.
Hotels
It may be a so-so year for hotels as leisure travel softens and hotels face competition from cruise ships and short-term rentals like Airbnb. Urban hotels and airport hotels figure to do the best, with the latter boosted by business travel. Resorts will see another tough year.
Residential
Finally, look for residential space to struggle with slow rent growth. A wave of new apartments hitting the market lately won’t be enough to lower occupancy rates from their high levels but will keep rent increases to a tepid 1.2% average this year.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
Related Content
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Ask the Editor: Capital Gains and Tax PlanningAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on capital gains tax rates and end-of-year tax planning
-
10 Predictions for 2025 from The Kiplinger LetterThe Kiplinger Letter As 2025 arrives, here are our top 10 forecasts for the new year.
-
Will Lower Mortgage Rates Bring Relief to the Housing Market?The Kiplinger Letter As mortgage rates slowly come down here's what to expect in the housing market over the next year or so.
-
Aging in Place Will Be Big Business for Home BuildersThe Kiplinger Letter Many people will be looking to make their homes aging-friendly in the years to come.
-
Landlord With Rental Income? See if You Qualify for a 20% Tax BreakThe Tax Letter Many landlords are eligible to take the 20% tax deduction for qualified business income
-
Knowing How to Compute Tax Basis in Your Home Can Save You MoneyThe Tax Letter Whether you're selling or buying a home, you'll want to know how to compute tax basis. It could save you on taxes when you sell.
-
10 Predictions for 2024 from The Kiplinger LetterThe Kiplinger Letter As 2023 wraps up, here are 10 big predictions for the new year.
-
Delinquent CRE Loans Are on the Rise: The Kiplinger Letter
The Kiplinger Letter Banks are expanding their efforts to restructure CRE loans to avoid losses from the commercial real estate sector.
-
As Mortgage Rates Rise, Renting Is Now Cheaper Than Buying for Many: The Kiplinger Letter
The Kiplinger Letter A jump in mortgage rates has caused housing affordability to slump and priced many first-time home buyers out of the market.
