Aegon Asset Management - Thu, 06/20/2024 - 20:52

US CRE Insights – June 2024

  • The optimism seen earlier this year on interest rates has not translated into a rebound in transaction volume. We believe buyers and sellers need to come to a better agreement on pricing before we see meaningful improvement.
  • The sharp rise in interest rates since early 2022 is raising the risk of refinancing for maturing commercial real estate loans. Given where we are in the current cycle, Aegon Asset Management expects that distress will certainly rise as more loans mature and face difficulty refinancing. However, the magnitude of distress may not be as severe as the market fears.
  • The office sector continues to find minimal demand for space, with vacancies rising another 20 basis points to a new record high of 13.7%.1 Newer vintage offices continue to see positive absorptions, and we believe bifurcations in performance will widen further as leases renew.   
Property sector outlook   


Sources: National Council of Real Estate Investment Fiduciaries, CoStar Realty Information Inc., and Aegon Real Assets US. As of March 31, 2024.


Apartment sector fundamentals are likely to improve as supply and demand come to a better balance in 2024. During the first quarter of 2024, apartment supply continued to outpace demand. However, demand continued to grow, registering the highest level since late 2021. By the end of 2024, current supply projections show an almost 32% pullback from the record high posted in 2023. With apartment demand on the rise, this could be an opportunity for the sector to stabilize and recover in the latter half of this year.1


The industrial sector is still digesting the massive wave of unleased properties delivered over the past year, with the current vacancy rate rising by 50 bps over the past quarter. Despite near-term supply pressure, the vacancy rate remains near the historical norm. In addition, new supply for industrial properties has plummeted since last fall. The current construction pipeline suggests new deliveries are expected to reach a 10-year low in mid-2025.1


The office sector continues to find minimal demand for space, with vacancies rising another 20 bps to a new record high of 13.7%. Newer vintage offices continue to see positive absorptions, and we believe bifurcations in performance will widen further as leases renew.1


The first quarter of 2024 saw a slight softening of the retail sector, but it remained close to the tightest level ever. With minimal supply-side pressure, demand remained robust, and many retailers struggled to find quality spaces for expansion.1


1 CoStar Realty Information, Inc. March 31, 2024.  

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