As 2023 draws to a close, here’s what we need to know moving into the new year according to JP Morgan’s 2024 market outlook:
Multifamily Strength: Multifamily continues to perform strongly. Though rent growth has slowed, vacancy remained steady at 5% throughout 2023. High interest rates will keep mortgage rates up, and buyers out, driving multifamily demand. Luxury apartments are the only notable concern as demand struggles resulting in concessions to attract tenants and reduced rents.
Interest Rate Rollercoaster: The bond market experienced turbulence in Q4 of 2023. The Federal Reserve’s rate decisions continue to be a focal point, with potential cuts on the horizon in 2024. Remember, the Fed influences short-term rates, but market forces dictate fixed rates.
Rising Costs: Inflation has driven up construction costs and insurance premiums. Commercial real estate coverage is becoming more expensive and less comprehensive. Strategies like rent increase and operational efficiencies can be considered to manage these costs.
Cash Optimization: In uncertain markets, having accessible cash for quick asset purchases is crucial. Investing in treasury services can be a game-changer.
Affordable Housing: Addressing the affordable housing shortage is key. Innovative construction methods and policy reforms can make a significant impact.
Proptech & AI Advancements: Leveraging technology in property management offers efficiency and competitive advantages.
Energy Efficiency: With rising energy costs, eco-friendly upgrades are not just cost-saving but also increasingly necessary for development approvals.
The Bottom Line: Stay alert and liquid. The commercial real estate landscape is shifting, and as many assets classes moderate entering into 2024, being prepared to seize opportunities as they arise is crucial for success in 2024. If you have questions about multifamily investing, connect with an MMG Advisor today!
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