Perception vs. reality: a strategic time for CRE investment in the U.S.

graph of commercial property price index and consumer sentiment index compared to federal funds rate in major and non-major markets in the U.S. from 2001 to 2024
  • A common concern shared by market participants is the extent of challenges affecting the broader commercial real estate market. The good news is that perception is worse than reality. While overall consumer sentiment has dropped 35% since 2020, CRE valuations across all property types are up 2% in major markets, despite the current interest rate environment.
  • The increasing gap between consumer sentiment and commercial property pricing represents a tremendously opportunistic time to be a buyer, where properties can be acquired at or below replacement cost, with a smaller pool of prospective buyers. With the cost of debt increasing significantly since 2020, levered buyers are also sidelined from acquiring real estate assets.
  • Not since the Great Recession in 2008, has there been such a wide gap between consumer sentiment and commercial property pricing, in which many distressed acquisitions were made at substantial discounts.

September 5, 2024

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