2024 Outlook Survey

I asked 22 capital providers the following question:

What's your personal outlook for 2024?

Here are their responses:

Family office - "I think it will be a great environment to deploy capital in. Specifically excited about multifamily equity in core/core+ type assets in the Southeast and preferred equity in multifamily more broadly. We anticipate getting more deals done this year than the last two years combined."

Family office - "I see a slightly stronger than consensus economy in the first half of the year and weaker than consensus economy in the second half of the year. I see the fed slightly disappointing the market through most of the year by being slower to decrease rates than consensus until they’re perhaps forced by a market event in the second half of the year to step up support.

I think the 10-year stays in the 3.25%-4.25% range throughout the year. I see CRE cap rates continuing to expand to adjust to the reality of higher risk free rates and financing costs. I also expect transaction volumes will increase substantially from 2023 levels as dry powder begins to get put to work. I expect to see financing spreads/costs remain elevated throughout the year despite some modest relief in index floating rates."

Family office - "Our perspective is that interest rates are likely to stay elevated for an extended period, affecting both the longer and shorter segments of the yield curve. This doesn't imply that there won't be slight reductions from the beginning of the year, but rather that there's an overestimation in the market regarding the frequency of rate cuts, particularly in the shorter segment.

In terms of equity investment, we find it appealing to invest in recently developed properties in sectors that are currently experiencing an excess in supply, such as storage and multifamily. Although we anticipate initial challenges in increasing NOI due to this oversupply, we expect the situation to stabilize and these assets to perform robustly over the following five years, offering lower risks compared to new construction projects."

Institutional LP - "I think rates will be higher generally than folks are expecting right now. Lower rates from here mean bad economy, which is also bad for CRE. Also seems like liquidity has to pick up but the equity/debt mix is probably interest rate dependent."

Institutional LP - "I think the market continues to see limited transaction activity given heightened uncertainty around election outcome, geopolitical conflicts, inflation, interest rates, recession. To the extent inflation, interest rates and recession picture becomes more certain we could see significant pick up in transaction activity. Otherwise I think we have another slow and steady down year on valuations with perhaps volatility in the public markets, but relatively quiet private markets activity."

Institutional LP - "More of the same for the first 6 months of the year, non-office distress doesn’t appear in scale until the second half of the year."

Life company - "I think it’s still going to be a tough year. Inflation although down, remains stubborn and may be too high for feds to lower rates, particularly in the first half of the year. It’s an election year (and likely to be highly divisive) which will lead to a wait and see approach. I don’t think we’ve hit the bottom for valuations yet and until there is greater visibility there, institutional capital will not jump back in a meaningful way. Rate stability is/will help but I just don’t see a steep decline in index rates absent more recessionary data (which would come with its own set of challenges).

I am optimistic there will be more distressed/transitional debt opportunities out there as existing lenders won’t kick the can another year. Life company allocations/goals will be down due to slower product sales and absorbing losses/extensions on existing office. Geopolitical risk is very troublesome and not being talked about enough."

Life company - "It’s going to be a very competitive year of lenders chasing high quality deals. The market is overly enthusiastic currently, which is already causing lenders to be ultra aggressive on the first half of the year. I believe a realization will set in during 2Q that things aren’t as good and/or trending in the right direction as we thought they would be and we will see a retreat from lenders in the back half of the year because of this (realization) and election uncertainty."

Life company - "I keep telling everyone that I’m “blindly optimistic”. Not company opinion, I just feel that we have some really good tailwinds as we head into middle part of the year with rates coming in and an election looming. I wouldn’t be surprised to see a flurry of activity between now and late summer and then a precipitous drop off until elections."

Life company - "For non-recourse construction lending, I’m very excited for 2024. We’ve enjoyed significantly less competition and I think that we will continue to see less competition at least through the first half of the year. This allows us to win deals with very strong sponsors we wouldn’t have worked with when interest rates were low and there was more competition from banks.

I believe bank appetite will continue to be muted in 2024 due to tight liquidity and capital ratios, and stronger regulatory oversight. It will also be interesting to see how banks fair with loan maturities on assets with depressed values such as office. Perhaps we will see further bank consolidation this year as well."

Life company - "With the current market dynamic of fixed rates at a relatively attractive level and other fixed rate lenders’ (CMBS and Banks) challenges, the life companies will continue to dominate the fixed rate market in the near term.

Debt fund - "Feels like rates are staying higher for longer, and borrowers are going to have to start realizing that rates are not coming down, quickly, in the near future. I think that we will start to see more transactions happen as conventional loans mature and borrowers are forced to make decisions."

Debt fund - "First half slow lending really picking up in the 2nd half if those borrowers have fresh equity to inject to right size the loan at refinance. Lenders have kicked the can down the road about as far as it will go forcing borrower’s hand to either sell (at the loan balance if they are lucky), come in with new equity checks to close the loan, or recapitalize the borrower with expensive rescue capital. I see a tremendous amount of stress that is yet uncovered/exposed because for the last two years lenders have kicked the can down the road and they can’t keep doing that….translates to a lot of givebacks/foreclosures.

My personal view is we are going to see a maybe once (or twice now) in a career reset of values and a lot of folks get hurt, we are at the start of that curve not really in it too much. I have gone through a few cycles but this one feels like it has the potential to be the worst, especially office and then apartments bought in 2020 to early 2022."

Debt fund - "I think it will be quiet in the 1st half as the market sits and waits for rate reductions that may or may not materialize. I also think this exacerbates the issue of existing lenders extending their existing book."

Debt fund - "Overall, I am more positive on the market than most. I believe we will see an uptick in transaction volume with a high volume of maturities this year. There will be a lot of capital ready to deploy throughout the year, but I believe bridge capital will be the strongest of all buckets this year."

Debt fund - "I think the markets once again got a little ahead of things with the amount of rate cuts projected for 2024, particularly based on the economic data points we’ve seen this month – CPI higher, strong retail sales, weekly jobless claims at its lowest since fall of 2022, etc. So I do think there will be some re-pricing in the treasury market as investors get in line with the Fed. I am hopeful we will see some normalization of the yield curve as recession fears continue to dissipate and Fed gears up for rate cuts. This should help improve spreads across the board."

Bank - "We have the majority of our office debt on the books restructured and put to bed for a while. I am cautiously optimistic with the tapering of interest rates and liquidity pressure. Some banks' appetite have slowly come back."

Bank - "I personally think banks will continue to manage their loan book and not look to grow their balance sheet. Loan growth will be flat or a little down. The positive will be that the second half of the year will loosen up for lending. The CMBS market is off to a hot start so that will push spreads lower and will fill the void with banks still being selective."

Bank - "I’m reasonably optimistic about this year, although I was feeling better with the 10-year treasury in the 3.90% range. Either way, I think more deals will get done this year compared to last year as bridge loan maturities come due."

Bank - "My personal view is the pending recession we’ve all been waiting for will not come, but more importantly, the consensus market view agrees and so more acquisitions will occur bolstered by lower interest rates and banks' desire to ‘get something done’ because 2023 was extremely slow. There's still a lot of distress and it's tough to pencil a good amount of refi’s, but big money center banks will continue to work with their best clients. There was zero risk taking from the bank side in 2023 and that should change in 2024."

Bank - "It is going to be tough sledding into at least the first half of the year. Banks got super picky on what loans they were willing to provide in 2023 based on the continued elevated interest rate environment and the stresses that leads to in portfolios. Deal flow continues to be extremely light – both in terms of syndications that we are leading, as well as inbound calls from other syndicators.

If banks are still actively lending, they are doing it for their best existing customers at very favorable structures, and they are not interested in buying into syndicated deals without wallet share enhancements. Call me a pessimist, but I think it will be at least until the back half of the year for rates to drop and banks to get more liberal with their buy-side appetite."

Bank - "The market will heat up again, against consensus because people want to do deals. Some people are forced to sell, so they will take major haircuts. There are a lot of loan workouts, which means smart PE will get great deals, while banks are happy to get paid off. Assisted living is coming back and is near/past the inflection point."

If you're open to sharing your 2024 outlook, I'd appreciate hearing your thoughts in the comments. Thank you!