By tapping into our network’s experiences and expectations, we aimed to paint a comprehensive picture of the current state and future outlook of commercial real estate. Here are the valuable insights we gathered from our audience.
Economic Shifts: Impact on Commercial Real Estate
Our first poll aimed to gauge how rising consumer debt and declining savings rates influence investment strategies within the real estate sector. We asked:
“US credit card spending hits $1 trillion while savings fall under 5%. But how will these changes impact commercial real estate investment? What action will you take?”
The results:
- 50% of respondents said they plan to hold their current properties
- 25% of respondents said they are committed to ownership
- 17% of respondents said they plan to expand their retail property ownership
- 8% of respondents said they are considering a property sale
Half of the respondents planning to hold their properties suggests current market stability, but it may not indicate future trends or deeper motivations. In contrast, 25% being committed to ownership highlights a strong, long-term demand, reflecting ownership as a core financial or personal strategy. These insights indicate a cautious yet committed approach among investors. While the high spending and low savings rates might typically signal economic instability, a significant portion of respondents are choosing to hold or even expand their investments. This suggests a strong belief in the resilience and long-term value of commercial real estate, even in uncertain economic times.
Commercial Lending Rates: Shaping Commercial Real Estate Moves
The goal of our second poll goal was to understand how the current lending environment is affecting investors’ plans and whether upcoming loan maturities are a significant concern. We asked:
“Data shows that the impact of interest rates is shaping commercial real estate options, with rates significantly higher compared to 2014-2019. Do you have loans coming due in 2024?”
The results:
- 73% of respondents said no
- 27% of respondents said yes
These results indicate that while a notable minority of investors face upcoming loan maturities, the majority are not immediately pressured by rising interest rates. This could mean that most investors have either locked in favorable rates or are navigating their investments without imminent refinancing needs, allowing them to strategically plan for future rate changes.
Return-to-Office Rates
Our third poll aimed to capture the varying degrees of office re-occupancy and how these trends influence the commercial office space market. We asked:
“According to recent data, the US has the lowest return-to-office rates in the developed world, with Europe heading towards 80% and Houston’s highest at 55%. What percentage of your office has returned to work?”
The results:
- 56% of respondents said 70-100%
- 18% of respondents said 30-70%
- 16% of respondents said less than 10%
- 10% of respondents said 10-30%
These results indicate a significant variance in return-to-office rates. Most respondents report high return rates, suggesting that while some regions and industries embrace hybrid or remote work models, others see a robust return to traditional office settings. This disparity highlights the need for adaptable real estate strategies catering to high- and low-occupancy scenarios.
Annual Price Growth Trend
Our next poll was designed to understand investors’ reactions to declining asset values and their strategies moving forward. We asked:
“According to the latest data, all asset classes experienced negative annual price growth in 2023, with the suburban office reaching a low of -10% in July 2023 before slightly improving to -5%. Retail also reached a low of -10% in July 2023. What will you do if the negative annual price growth trend continues in the real estate market in 2024?”
The results:
- 43% of respondents said they plan to continue in real estate
- 36% of respondents said they plan to wait and see
- 11% of respondents said they plan to invest in other options
- 11% of respondents said they plan to sell all real estate assets
These results indicate a predominantly optimistic or at least hopeful stance among investors, with nearly half planning to continue their involvement in real estate despite recent price declines. A significant portion adopts a wait-and-see approach, showing cautious optimism, while a minority is ready to diversify or exit the market if trends don’t improve.
Commercial Real Estate Resurgence: Navigating Sectoral Shifts & Q3 Progress
Finally, we explored the resurgence of certain real estate sectors and overall market recovery. We asked:
“Witnessing a recovery in industrial, hotel, and retail sectors, Q3 US property returns improved from nearly -5% to about -1% on average. In light of this, what will you do with your property investments in 2024?”
The results:
- 46% of respondents said they plan to invest in more property
- 38% of respondents said they plan to hold onto current investments
- 15% of respondents said they plan to look for alternatives
- 0% of respondents said they plan to withdraw investments
These results indicate a strong confidence in the market’s recovery. Almost half of the respondents are looking to increase their investments, reflecting a positive outlook on continued sectoral improvements. The significant number of respondents holding onto their current investments further underscores this optimism. Interestingly, none of the respondents plan to withdraw investments, suggesting a collective belief in the sector’s resilience and potential for growth.
Looking Forward
Our polls provide a snapshot of the current sentiment in the commercial real estate sector. Despite economic uncertainties, there is a prevailing sense of cautious optimism and strategic planning among investors. As we navigate these economic shifts, staying informed and adaptable will be key to making sound investment decisions in the commercial real estate market.
For personalized advice and strategic guidance, consider reaching out to our team of experts. We utilize comprehensive market insights to identify and capitalize on commercial real estate opportunities tailored to your needs.
Trust RE/MAX to guide you through the complexities of the Houston commercial property landscape, turning potential into profit.
